A hearing slated for May 22 will address the U.S. Securities and Exchange Commission's (SEC) proposed remedies in the case involving Terraform Labs (TFL) and its co-founder, Do Kwon. The cryptocurrency company is advocating for a significantly different ruling than the one put forth by the regulatory body.
In response to the SEC's May 1 motion for final judgment, Terraform Labs, through its attorneys, argued against the regulator's request for a $5.3 billion disgorgement, along with interest and civil penalties for fraud. They contend that any ill-gotten gains should be extracted from the Luna Foundation Guard (LFG), a "non-party" in the civil case.
Terraform's legal team asserted that the SEC lacks evidence to attribute the losses central to the civil case to the platform or Kwon's U.S. activities. They also cautioned against the SEC's proposal for a "geographically unrestricted injunction" in seeking disgorgement and civil penalties. Terraform proposed a $1 million civil penalty, deeming it more suitable than the SEC's multibillion-dollar request. Meanwhile, Kwon, currently in Montenegro pending extradition to the United States or South Korea, contested the SEC's proposed remedy on similar grounds.
An attorney representing Do Kwon emphasized that the SEC must establish that Kwon's actions, whether within or outside the U.S., had a "foreseeable material effect" in the country. They argued that Kwon's involvement in the conduct leading to the judgment occurred entirely abroad, primarily in South Korea and Singapore.
Following a two-week trial, Terraform and Kwon were found liable for defrauding investors. All involved parties are slated to present arguments regarding the proposed remedies before Judge Jed Rakoff on May 22. However, uncertainties loom over Kwon's courtroom appearance due to his legal status in Montenegro.
