Terraform’s Do Kwon Nears Fraud Settlement with SEC
2 min read
Terraform's Do Kwon Nears Fraud Settlement with SEC
Terraform Labs and its CEO Do Kwon have tentatively agreed to resolve a fraud case with the U.S. Securities and Exchange Commission (SEC), as indicated by recent court filings. This preliminary agreement was revealed by the legal representatives of both sides during a phone conference with Judge Jed S. Rakoff on May 29. The finalized settlement details are anticipated to be completed and presented for court approval by June 12, 2024.
The initial adjudication in February determined that Terraform and Kwon had committed fraud against investors, a finding that set the stage for discussions on potential remedies, which took place on May 29. The crux of the SEC’s case against Terraform and Kwon revolved around the deceptive promotion and sale of their cryptocurrency tokens, most notably the algorithmic stablecoin Terra USD (UST) and other associated tokens.
The SEC’s allegations highlighted that Terraform and Kwon failed to register these crypto assets properly and misled investors about their stability and potential returns. This deceptive conduct culminated in the collapse of Terraforms in May 2022, setting off a severe downturn across the cryptocurrency market, often referred to as a crypto winter. The fallout from this collapse left numerous crypto firms and investors reeling.
From the SEC’s perspective, the consequences for Terraform and Kwon should be severe. The regulator has been adamant about imposing a financial penalty approximating $5.3 billion. This figure encompasses disgorgement, prejudgment interest, and civil penalties aimed at addressing the losses suffered by defrauded investors.
Contrastingly, Terraform Labs has advocated for a significantly lower penalty, proposing just $1 million. They argue against the disgorgement component, particularly for associated entities not directly accused in the SEC’s case, such as the Luna Foundation Guard. This stance forms a significant point of contention between the parties.
Beyond financial penalties, the SEC has sought more stringent measures against Kwon himself. They proposed a ban on Kwon serving in any officer or director role within securities-issuing entities. The SEC has demanded that Kwon provide comprehensive disclosures regarding his financial accounts and assets.
In response to the SEC’s demands, Kwon has invoked his Fifth Amendment rights, arguing that revealing the details of his financial holdings could lead to self-incrimination. This adds another layer of complexity to the legal wrangling surrounding the case.
Kwon’s legal troubles extend beyond the SEC case. He was arrested in March 2023 for using falsified travel documents while attempting to leave Montenegro, a country where he also faces potential legal charges. After spending some time in detention, he was released on bail, yet the U.S. remains resolute in its efforts to secure his extradition for prosecution.
How is Kwon even out on bail? Between the SEC case and the incidents in Montenegro, he shouldn’t be walking free!
Why would the court even consider a lower penalty? The damage done in 2022 was catastrophic! This agreement is ridiculous.
Terraform and Kwon’s deceptive practices wiped out billions—$1 million is a joke for a penalty. This is infuriating! 🤬
Kwon’s slippery defenses are frustrating. It’s clear he’s trying to evade accountability at all costs.
If the settlement details don’t reflect the real impact of Terraform’s fraud, it’s a huge failure of our justice system.
Great to see some progress towards a resolution! Hoping for a fair outcome for all parties involved.
Kudos to the legal teams working hard to find an amicable resolution. 🌸
Impressed with the transparency in the negotiations. This shows both sides are working towards a just settlement.
Looking forward to seeing the full details of the settlement. Great progress so far!
A fair settlement is essential for rebuilding trust in the crypto market. Happy to see progress!
Justice is in progress! Lets hope this settlement brings some relief to affected investors.
The financial and emotional toll on investors should not be brushed off so easily. Kwon and Terraform deserve far steeper consequences. 😡👊
A proposed $1 million penalty? Seriously? That’s pocket change compared to the $5.3 billion lost! 😡 This is a mockery of justice.
This tentative agreement smells more like a slap on the wrist for Terraform and Do Kwon . The SEC needs to enforce harsher penalties to set a precedent!
What a relief to see both parties working towards a resolution. Hoping for a fair outcome!
Every effort towards resolution is a win for transparency and investor protection in the crypto world.
Using the Fifth Amendment to dodge transparency about his assets? Classic move by those with something to hide. Kwon’s actions scream guilt!
Exciting to watch this unfold. Could be a turning point for the future of crypto regulations! 🌌
Hopefully, this tentative agreement will lead to fair compensation for all the investors who were affected.
Navigating the crypto world is tricky. Glad to hear Terraform and the SEC are making strides toward resolution!
Fingers crossed that this settlement will provide a clear path for future crypto regulations.
Do Kwon should face a lifetime ban from any financial role. Allowing him to continue in this industry is a recipe for disaster.
The SEC needs to stand firm and keep pushing for that $5.3 billion penalty. Anything less is just a win for scammers everywhere. 🏦💥
Glad to see some accountability in the crypto world! Heres to hoping for a fair and balanced resolution.
Positive signs for the crypto industry as a whole. Hope this leads to more regulatory clarity.