Lawyers for Terraform Labs and its co-founder Do Kwon say a fine closer to $1 million is more appropriate after being found guilty of fraud and not the $5.3 billion proposed by the U.S. Securities and Exchange Commission.
Their ask comes a week after the SEC said Kwon and Terraform should pay about $4.7 billion in disgorgement and prejudgment interest and said Terraform and Kwon should pay $420 million and $100 million, respectively, in civil penalties.
That figure should be much lower, Kwon and Terraform's lawyers said in a court filing posted late last week.
"In conclusion, the Court should not grant any injunctive relief or disgorgement, and should impose at most a $1 million civil penalty against TFL," the lawyers said.
The SEC charged Terraform and Kwon in February 2023 over the algorithmic stablecoin Terra USD (UST), which collapsed in a dramatic fashion a year earlier.
Algorithmic stablecoins use market incentives via algorithms to maintain a stable price. Terra was linked to luna, a governance token, to keep the prices stable. UST crashed in May 2022, wiping out more than $50 billion.
Earlier this month, a jury found that both Terraform and Kwon misled investors and were found liable for civil fraud. The main issues that the jury had to delve into revolved around the SEC's claims that Kwon and Terraform violated federal securities laws by engaging in fraud connected to the buying and selling of Terraform securities. Judge Jed Rakoff earlier granted summary judgment to the SEC in its claim that Terraform and Kwon offered and sold unregistered securities.
At the time of the verdict, a spokesperson for Terraform said they were "carefully weighing our options and next steps.”
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