Following a jury’s determination that Terraform Labs and co-founder Do Kwon were guilty of fraud in a case brought by the United States Securities and Exchange Commission, a federal judge has instructed the parties to discuss potential remedies, which could range from millions to billions of dollars.
In a filing on April 29, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York stated that lawyers representing the SEC, Kwon, and Terraform Labs should appear in court on May 22 to present arguments regarding the proposed remedies following the jury’s verdict. All parties have already submitted their filings on their respective requests for disgorgement and civil penalties, but Judge Rakoff’s order allowed for additional submissions before the court appearance.
The SEC has requested that Kwon and Terraform Labs pay approximately $4.7 billion in disgorgement and prejudgment interest, as well as a combined $520 million in civil penalties. Terraform Labs’ legal team, on the other hand, has suggested a $1 million civil penalty and no injunctive relief or disgorgement. Both parties have until May 6 and May 1, respectively, to file supplements to their existing proposals.
On April 5, a jury found Terraform Labs and Kwon guilty of defrauding investors following a two-week trial with the SEC. Kwon was unable to attend the trial in person due to his arrest in Montenegro in 2023 for using falsified travel documents. As the courts in Montenegro assess extradition requests from the U.S. and South Korea, it remains uncertain whether Kwon will be able to appear in the U.S. court on May 22.
Terraform Labs has been undergoing bankruptcy proceedings since filing for Chapter 11 protection in January. At the time, the company reported estimated liabilities and assets ranging from $100 million to $500 million.
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