Terraform Labs and its co-founder Do Kwon are contesting the Securities and Exchange Commission’s (SEC) demand for $4.7 billion in disgorgement, asserting that the alleged losses did not occur within the United States, thus falling outside the SEC’s jurisdiction. As the legal battle unfolds, Terraform argues against the SEC’s proposal for substantial financial penalties following a jury verdict that found the crypto firm and Kwon guilty of fraud.
Details of the Dispute
In recent court filings, Terraform’s legal team emphasized that the activities leading to any alleged losses took place primarily outside the U.S., challenging the SEC’s basis for claiming disgorgement and penalties. The defense argued that the SEC provided “no evidence” directly linking Kwon’s or Terraform’s U.S. activities to the significant losses in question. They propose a drastically reduced penalty of $1 million in civil fines, contrasting sharply with the SEC’s multi-billion dollar figure.
Also Read: Terraform Labs Disputes SEC’s $5.3 Billion Fine, Offers $1 Million Settlement
Key Arguments and Upcoming Hearing
The filings also highlighted:
- Jurisdictional Challenges: Terraform maintains that its token sales and associated activities occurred almost entirely abroad, predominantly in Korea and Singapore.
- Kwon’s Legal Status: Currently detained in Montenegro, Kwon faces extradition issues, complicating his ability to participate in upcoming legal proceedings.
All parties are set to present their arguments before Judge Jed Rakoff on May 22, where the focus will be on negotiating appropriate remedies based on the jury’s findings and the geographical scope of the alleged misconduct.
