SEC Seeks $5.3 Billion Fine for Terraform Labs and Do Kwon

Terraform Labs and its co-founder Do Kwon are facing a $5.3 billion fine from the U.S. Securities and Exchange Commission (SEC) for defrauding investors. This comes after a jury found them liable for a multi-billion-dollar fraud. The SEC is seeking $4.7 billion in disgorgement and prejudgment interest, as well as $420 million and $100 million in civil penalties from Terraform and Kwon, respectively.

The SEC stated that the proposed fines are “conservative” but “reasonable,” given the vast wealth Kwon gained from Terraform’s ill-fated stablecoin. However, Terraform Labs argues that a maximum fine of $3.5 million would be more appropriate, while Kwon offers to pay just $800,000.

The SEC emphasized that the fines are necessary to send a strong message that such misconduct will not be tolerated. The court filing stated, “The Court should send an unequivocal message that this sort of brazen misconduct… will not be tolerated.” The SEC also seeks injunctions preventing Kwon and Terraform Labs from committing further securities violations and an officer-and-director ban on Kwon.

Terraform Labs and Kwon were found liable for misleading customers about the safety of investing in their algorithmic stablecoin Terra USD (UST) and its underlying blockchain’s utility. Crypto investors purchased more than $2 billion worth of UST from exchanges and other trading venues.