The United States Securities and Exchange Commission (SEC) has taken legal action against Terraform Labs and its co-founder, Do Kwon, seeking billions of dollars in civil fines and disgorgement. This move by the SEC is a response to alleged violations committed by Terraform Labs and Kwon, with the aim of holding them accountable for their actions.

The SEC is demanding that Terraform Labs and Kwon pay approximately $4.7 billion in disgorgement and prejudgment interest. Disgorgement involves the repayment of ill-gotten gains, while prejudgment interest compensates for the time value of money. Additionally, the SEC is seeking a total of $520 million in civil penalties, with Terraform Labs facing $420 million and Kwon facing $100 million in penalties.

Terraform Labs and Kwon have presented several potential solutions in response to the civil case. Terraform Labs proposed a maximum civil penalty of $3.5 million, while Kwon suggested a penalty of $800,000. The SEC’s proposed amounts are significantly higher than these estimates.

In addition to disgorgement and civil penalties, the SEC is considering additional measures to prevent future breaches. The SEC has requested that Kwon be prohibited from serving as an officer or director of a securities company. Furthermore, the SEC is seeking a “conduct-based injunction” to ensure that Terraform Labs and Kwon do not engage in similar violations in the future.

The SEC’s enforcement actions against Terraform Labs and Do Kwon underscore the agency’s commitment to protecting investors and enforcing securities laws. By holding individuals and companies accountable for their actions, the SEC aims to uphold the integrity of financial markets and promote fair practices.

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