SEC Seeking More Than $4.2 Billion In Penalties From Terra And Do Kwon

After a jury found Terraform Labs and its founder Do Kwon liable for civil fraud, the Securities and Exchange Commission has set the amount they are seeking in disgorgement at a total of more than $4.2 billion.

According to a court filing, the SEC is seeking to have Terra "pay disgorgement of $4,192,147,847 plus $545,748,909 in prejudgment interest; (3) ordering Terraform and Kwon to pay a $420 million and a $100 million civil penalty, respectively."

In separate filings, lawyers representing Terra and Do Kwon argued against a penalty of that size. Kwon's attorneys claimed that "there is no evidence that Mr. Kwon received any ill-gotten gains separate from what TFL received. As such, there are no illegal profits for Mr. Kwon to disgorge."

Terraform Labs had previously battled the SEC in a two-week long civil fraud trial that ended with a jury of New Yorkers finding both Do Kwon and the company liable for what led to the $40 billion collapse.

As part of the SEC’s motion for final judgement, the agency also included two declarations that attempted to provide further detail on how they arrived at the massive number for disgorgement. Both declarations — one from SEC Assistant Chief Accountant in the Division of Enforcement and another from the Assistant Director of the Data Science Group in the Crypto Assets and Cyber Unit — tracked Terraform Labs’ token sales of MIR, UST, and LUNA.

In total, the SEC produced “a description of combined blockchain and orderbook evidence that confirms that Terraform affiliates received a sum of at least ~$4.148 billion in crypto assets,” the declaration stated.

For its part, Terraform Labs had previously filed for Chapter 11 bankruptcy protection ahead of the trial. However, the SEC’s motion argues that the final penalty imposed on Terraform be “non-dischargeable in bankruptcy.”

Judge Rakoff is set to make a final judgement in the coming weeks.

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Disclosure: Terraform Labs is one investor among many in Trustless Media, the production company behind Coinage.