Attorneys for Terraform Labs claimed that since the Luna Foundation Guard (LFG) is currently a non-entity in this matter, the SEC should properly pursue the penalty from them.
Following Do Kwon’s fraud conviction, the US Securities and Exchange Commission (SEC) has recommended a $5.3 billion fine. On the other hand, attorneys for Terraform Labs argue that a $1 million punishment would be more reasonable. It’s interesting to note that they want the US SEC’s suggested punishment to be reduced by 99%.
The US SEC declared last week that Do Kwon and Terraform were required to pay prejudgment interest and disgorgement charges totaling $4.7 billion. They also want the payment of $520 million in civil penalties. But Terraform’s attorneys argued in their court brief that the punishment ought to be far less. The document stated:
“This provision prevents an order against TFL [Terraform Labs] to disgorge LFG money since TFL did not receive them. The SEC was required to name LFG as a defendant or relief defendant, which it did not do, in order to pursue disgorgement from Luna Foundation Guard (LFG). Those money are the property of LFG, not TFL, and LFG carried out the token sales that gave rise to them.”
The attorneys concluded by saying, “The Court should impose at most a $1 million civil penalty against TFL and should not grant any injunctive relief or disgorgement.”
The Case of Terraform and Do Kwon
Due to suspected violations, Terraform and Ripple are embroiled in legal conflicts with the SEC. The SEC brought charges against Terraform and its co-founder Kwon in February 2023 on matters pertaining to the algorithmic stablecoin Terra USD (UST).
On April 5, a jury convicted Terraform and Kwon guilty of deceiving investors after a two-week trial with the SEC. A representative for Terraform said that the company was carefully weighing its options and preparing its next course of action notwithstanding the ruling.
Travel limitations kept Kwon from leaving Montenegro, thus he was noticeably missing during the trial and verdict. Co-founder of Terraform Kwon was arrested in Montenegro in March 2023 on suspicion of using fake travel documents. The US and South Korea have both requested extradition, which is currently being considered by Montenegrin authorities.
Following the $40 billion failure of Terraform Labs in 2022, there was a severe market correction that resulted in the bankruptcy of numerous other cryptocurrency companies, including BlockFi, Celcius, FTX, and others. The platform filed for Chapter 11 bankruptcy protection earlier this year.
April 2024, Cryptoniteuae
