Do Kwon’s SEC Fraud Case: Key Updates

Do Kwon CEO of Terraform Labs, and his company are embroiled in a significant fraud case with the U.S. Securities and Exchange Commission (SEC). This case has drawn considerable attention due to its implications for the cryptocurrency market and regulatory landscape.

The SEC accused Terraform Labs and Do Kwon of defrauding investors through the misleading promotion and sale of crypto tokens, including the algorithmic stablecoin Terra USD (UST). The accusations highlighted the lack of proper registration and the misrepresentation of the stability and investment potential of these tokens.

As of May 29, 2024, both parties have agreed in principle to a settlement. The final terms are expected to be submitted for court approval by June 12, 2024. This development follows a significant ruling in February where Terraform and Kwon were found liable for investor fraud.

The SEC is seeking approximately $5.3 billion in disgorgement, prejudgment interest, and civil penalties. Conversely, Terraform Labs has proposed a significantly lower penalty of $1 million, disputing the SEC’s demand for disgorgement from affiliated entities not directly named in the case.

The SEC has also proposed a prohibition on Do Kwon’s ability to serve as an officer or director in any securities-issuing entity. Furthermore, the SEC demands full disclosure of Kwon’s financial accounts and assets, a request Kwon has resisted, citing his Fifth Amendment rights.

Do Kwon’s legal troubles extend beyond the SEC case. He was arrested in March 2023 for falsifying travel documents while attempting to leave Montenegro, where he also faces potential charges. He has since been released on bail, with the U.S. seeking his extradition.

The collapse of Terraform Labs in May 2022 triggered a significant downturn in the cryptocurrency market, affecting numerous crypto firms and investors. This incident marked the beginning of what is now referred to as the latest “crypto winter.”

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