SEC Seeks $4.2 Billion Disgorgement, Penalties Against Terra, Do Kwon

In the ongoing legal battle between the Securities and Exchange Commission (SEC) and Terraform Labs and its co-founder Do Kwon, the SEC is pushing for substantial penalties. Following a jury’s verdict against the defendants on all counts on April 5, 2024, the SEC has requested the court to order significant financial penalties and injunctions against Terraform Labs and Kwon.

The SEC’s motion, filed with the court, outlines the requested penalties: seeking a disgorgement of $4.2 billion along with a $420 million penalty against Terraform Labs and a $100 million penalty against Kwon. Additionally, the SEC is asking for injunctive relief to prevent further violations of securities laws by the defendants, including for Kwon to serve as an officer or director of a publicly traded company.

Kwon has opposed the injunction and disgorgement against him, arguing that the penalties should be considerably lower, ranging from $250,000 to $300,000. Kwon’s legal arguments contend that injunctive relief is unnecessary as he is no longer CEO of Terraform Labs and is not involved with any crypto-asset security company.

“Injunctive relief is not warranted against Mr. Kwon because the SEC cannot show that there is a real likelihood that Mr. Kwon will repeat the alleged conduct,” Kwon’s memorandum read.

Furthermore, Kwon asserts that disgorgement is unwarranted as there is no evidence that he personally gained from any alleged misconduct.

“Disgorgement is not proper against Mr. Kwon. Assuming the SEC manages to find a ‘victim’ in the U.S. who has suffered ‘pecuniary harm,’ there is no evidence that Mr. Kwon received any ill-gotten gains separate from what TFL received. As such, there are no illegal profits for Mr. Kwon to disgorge,” the memorandum also wrote.

Kwon was released from prison in Montenegro earlier this year because his regular prison term for using fake papers ended. His passport was kept to stop him from leaving the country and he was taken for an interview with the police for foreigners.

His lawyer confirmed his release and said Kwon would stay in a shelter for foreigners. They plan to appeal to let Kwon stay free until the court decides on extradition.

Montenegro’s Supreme Court halted the extradition of the former crypto mogul to South Korea, pausing the attempt to send him back to his home country. This decision came after lower-level judges’ rulings were contested due to procedural errors.

In South Korea, penalties are less severe compared to the US, where prosecutors seek to prosecute Kwon for the $40 billion collapse of the TerraUSD cryptocurrency in 2022. The Supreme Court’s action followed a challenge by the top prosecutor in Montenegro, who cited procedural errors in the rulings favoring South Korea’s extradition request. Extradition to either country is now pending further deliberations by the court, with no specified timeline for a final decision.

Information for this story was found via Fortune and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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