Following a jury's verdict finding Terraform Labs and its co-founder Do Kwon guilty of fraud in a case brought by the U.S. Securities and Exchange Commission (SEC), a federal judge has directed both sides to discuss proposed remedies, which could range from millions to billions of dollars. Judge Jed Rakoff, in an April 29 filing in the U.S. District Court for the Southern District of New York, scheduled a court appearance for May 22, where attorneys representing the SEC, Kwon, and Terraform Labs will present arguments regarding the proposed remedies. While all parties have submitted their requests for disgorgement and civil penalties, the order allows for supplements to be provided before the court date.
The SEC is seeking approximately $4.7 billion in disgorgement and prejudgment interest from Kwon and Terraform Labs, along with civil penalties totaling $520 million. Terraform Labs' legal team, on the other hand, has proposed a $1 million civil penalty and no "injunctive relief or forfeiture." Both parties are required to submit supplements to their existing proposals by May 6 and May 1, respectively.
The jury's verdict on April 5 came after a two-week trial, during which Terraform Labs and Kwon were found liable for defrauding investors. Kwon, however, was unable to attend the trial in person due to his 2023 arrest in Montenegro for using forged travel documents. He remains in the country as extradition requests from the United States and South Korea are being considered by the Montenegro courts, leaving uncertainty about his ability to appear in a U.S. court on May 22.
Meanwhile, Terraform Labs has been undergoing bankruptcy proceedings since filing for Chapter 11 protection in January. At the time of filing, the company reported pro forma liabilities and assets ranging between $100 million and $500 million.
