June 5, 2024
sec settlement
Policy & Regulation

Terraform & CEO Kwon Near SEC Settlement

Settlement in Principle

Terraform Labs and its CEO, Do Kwon, have reached a preliminary agreement to resolve their fraud case with the U.S. Securities and Exchange Commission (SEC). Court documents reveal that lawyers for both parties announced this settlement during a telephone conference with Judge Jed S. Rakoff on May 29. The final terms of the settlement are anticipated to be completed and submitted for court approval by June 12, 2024.

Liability and Penalties

In February, Terraform and Kwon were found liable for defrauding investors in a civil case brought by the SEC. The SEC’s case centered on the misleading promotion and sale of various crypto tokens, notably the algorithmic stablecoin Terra USD (UST) and associated tokens. The SEC alleged that Terraform and Kwon marketed these crypto assets without proper registration and misled investors about their stability and potential returns. The collapse of Terraform in May 2022 significantly impacted the crypto market, triggering a downturn that affected numerous firms and investors.

Financial Disputes

The SEC has demanded approximately $5.3 billion in disgorgement, prejudgment interest, and civil penalties from Kwon and Terraform. In contrast, Terraform Labs has suggested a much lower penalty of $1 million, contesting the SEC’s demand for disgorgement, especially from entities like the Luna Foundation Guard, which were not directly implicated in the SEC’s case.

Additionally, the SEC proposed barring Kwon from serving as an officer or director of any securities-issuing company and requested full disclosure of his financial accounts and assets. Kwon, however, argued that revealing this information would infringe upon his Fifth Amendment rights against self-incrimination.

Ongoing legal challenges

The legal troubles for Do Kwon extend beyond the SEC case. In March 2023, Kwon was arrested for falsifying travel documents while attempting to leave Montenegro. He was released on bail, but the U.S. is currently seeking his extradition to face charges.

Evolving Crypto Landscape

As Terraform Labs and Do Kwon move towards finalizing their settlement with the SEC, the broader implications for the cryptocurrency industry remain significant. The resolution of this case could set a precedent for how regulatory bodies address future fraud cases within the rapidly evolving crypto market. The final settlement details, expected by mid-June, will likely shape the next steps for both Terraform and the SEC.

Image by azerbaijan_stockers on Freepik

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

Related posts

SEC Pushes Bitcoin ETF Approval Deadlines to Early 2024

Chloe Taylor

Indonesian VP Candidate Gibran Raka Charts Path for Crypto Innovation

Kevin Wilson

South Korean Crypto Lending Firm Delio Under Investigation for Alleged Fraud and Embezzlement

Eva Moore

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Please enter CoinGecko Free Api Key to get this plugin works.