The U.S. District Court for the Southern District of New York has issued a final judgment in the case against Terraform Labs and its co-founder Do Kwon, finding that the defendants violated multiple securities law provisions and imposing strict penalties and restrictions on their future activities.
The lawsuit, filed by the U.S. Securities and Exchange Commission (SEC), has attracted widespread attention.
Verdict
According to court documents on June 12, Terraform Labs and Do Kwon were fined a total of approximately $4.5 billion, including $3.6 billion in illegal gains, $467 million in prejudgment interest, and $420 million in civil penalties. Do Kwon was personally liable for $110 million in illegal gains and $14.3 million in prejudgment interest.
In addition, Kwon was ordered to transfer various assets held by him, including PYTH tokens, to Terraform's bankruptcy estate, which will be used to pay fines and distributed to injured investors through a liquidation trust. It is reported that Terraform Labs is allowed to treat the due amount as an unsecured claim in the bankruptcy case, and the SEC will receive funds based on the distribution priority when the Chapter 11 bankruptcy plan takes effect.
Implementation and Restrictions
If Kwon fails to comply with the transfer order within 30 days of the judgment, the SEC has the right to take all authorized collection procedures to enforce the court judgment, including taking civil contempt measures.
In addition to its payment obligations to Terraform Labs, Kwon is also required to pay $204.3 million in remediation costs, including an additional $80 million in civil penalties.
Activity ban
The judgment also prohibits Terraform Labs and Kwon from violating the antifraud provisions of Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act. At the same time, they are permanently prohibited from engaging in unregistered securities transactions, crypto-asset securities transactions, or inducing others to engage in crypto-asset securities transactions, and other related activities.
Despite these restrictions, Terraform Labs is still allowed to perform certain transactions related to its bankruptcy case, including disposing of cryptocurrencies from its bankruptcy estate with court approval, destroying wallet keys and burning tokens as required. The company can also allow third parties to withdraw, unstake and unwind positions on its platform.
Additionally, Kwon is permanently barred from serving as an officer or director of any issuer of any class of securities with registered securities or reporting obligations. #DoKwon #韩国 #Terra #法律裁决
Case Background
The SEC began filing a lawsuit against Terraform Labs and Kwon in February 2023, alleging that they defrauded cryptocurrency investors through the now-defunct Terra USD (UST) stablecoin. In April of this year, the court found the defendants guilty of fraud. $USTC
Conclusion
This case has had a profound impact on the cryptocurrency industry, reminding market participants that they must comply with securities laws and regulations. It also demonstrates the regulators’ determination to protect investors’ rights and interests and maintain market order.
As the legal process progresses and the judgment is enforced, the harmed investors can expect to receive a certain degree of compensation, and the entire industry will learn lessons from it and move towards a more transparent and standardized direction.
