Terraform Labs and its CEO, Do Kwon, are close to settling a fraud case with the U.S. Securities and Exchange Commission (SEC). The final terms are expected to be submitted for court approval by mid-June.
According to court documents, Terraform Labs and Do Kwon have reached a preliminary agreement with the SEC. Lawyers from both sides revealed this during a conference call with Judge Jed S. Rakoff on May 29. The settlement terms are anticipated to be finalized and presented to the court by June 12, 2024.
In February, Terraform Labs and Kwon were found responsible for deceiving investors in a civil case brought by the SEC. The case’s remedies were set to be discussed on May 29.
The SEC’s lawsuit focused on the misleading marketing and sale of crypto tokens, particularly the algorithmic stablecoin Terra USD (UST) and its associated tokens. The SEC accused Terraform and Kwon of selling crypto assets without proper registration and giving false information about their stability and investment potential.
The collapse of Terraform in May 2022 initiated a significant downturn in the crypto market, affecting many firms and investors.
Terraform and Kwon are facing substantial financial penalties, with the SEC seeking around $5.3 billion in disgorgement, prejudgment interest, and civil fines. Terraform Labs, however, has proposed a much lower penalty of $1 million and opposed the disgorgement, particularly from related entities not directly named in the SEC’s case, such as the Luna Foundation Guard.
The SEC has also suggested banning Kwon from serving as an officer or director of any securities-issuing company. Additionally, the SEC wants Kwon to fully disclose his financial accounts and assets. Kwon has argued that providing this information would violate his Fifth Amendment rights against self-incrimination.
In a separate issue, Kwon was arrested in March 2023 for using fake travel documents while trying to leave Montenegro, where he also faces potential charges. He was later released on bail, and the U.S. is seeking his extradition.
Summary Review: The upcoming settlement between Terraform Labs, Do Kwon, and the SEC marks a significant moment in the ongoing efforts to regulate the cryptocurrency industry. The proposed penalties and bans highlight the serious consequences of misleading investors and operating without proper registration. As the case progresses, it will serve as a crucial example for other crypto firms to adhere to regulatory standards and maintain transparency with investors.
Disclaimer: Remember that nothing in this article and everything under the responsibility of Web30 News should be interpreted as financial advice. The information provided is for entertainment and educational purposes only. Investing in cryptocurrency involves inherent risks and potential investors should be aware that capital is at risk and returns are never guaranteed. It is imperative that you conduct thorough research and consult with a qualified financial advisor before making any investment decision.
