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In a legal battle unfolding in March 2024, Terraform Labs and its co-founder Do Kwon faced fraud charges from a New York jury, with U.S. regulators seeking a $5.3 billion penalty. Terraform’s lawyers immediately oppose the allegations, citing jurisdictional and evidentiary issues. They argue that most of the token sales occurred outside the U.S., questioning the SEC’s claim of harm within U.S. jurisdiction.
Terraform Denies $5.3 Billion Fine
On April 5, Terraform and Kwon were convicted of fraud following a two-week trial. The SEC accuses Terraform Labs and Kwon of engaging in fraudulent activities that resulted in over $4 billion in illicit gains from unregistered token sales, including LUNA and UST tokens.
In a recent filing, the SEC highlighted that Terraform’s algorithmic stablecoin, intended to maintain parity with the US dollar, experienced a collapse in 2022, leading to a significant $40 billion loss in market value.
Following this, the SEC pushed for a $5.3 billion fine, which, if imposed, would be the largest in the crypto industry’s history, reflecting increased regulatory scrutiny from US authorities.
$1 Million Fine Is Okay
In response to the SEC’s aggressive stance, however, in a filing submitted on Wednesday, May 1, Terraform’s legal team refused these demands, highlighting that Kwon’s actions and token sales occurred outside the US, notably in Korea and Singapore, without direct impact or evidence of significant losses within the U.S.
Terraform Labs previously suggested that a more modest fine of $1 million would be more appropriate, questioning the proportionality of the proposed penalty. Meanwhile, the ongoing legal dispute highlights the escalating tension between regulatory authorities and prominent players in the cryptocurrency sector.
Maintaining Crypto Harmony
Gurbir Grewal, the director of the SEC’s Enforcement Division, praised the verdict, highlighting it as a significant example of the agency’s dedication to safeguarding investors and market integrity. This case’s impact underscores the need for compliance and accountability in the evolving cryptocurrency industry.