Terra

Lawyers for the firm claimed that any alleged losses caused by the platform’s or Do Kwon’s actions happened outside the United States, beyond the SEC’s authority in the civil case.

With a hearing scheduled for May 22 to listen to proposed remedies in the United States Securities and Exchange Commission’s (SEC’s) case against Terraform Labs (TFL) and co-founder Do Kwon, the crypto firm has argued for a substantially different judgment than that proposed by the regulator.

In a supplement to Terraform’s opposition to the SEC’s motion for final judgment filed on May 1, lawyers representing the crypto firm argued the financial regulator was not entitled to $5.3 billion in disgorgement, interest and civil penalties following a jury finding TFL and Kwon liable for fraud. Terraform built on its previously asserted claims that any disgorgement would effectively have to be obtained from the Luna Foundation Guard (LFG), a “non-party” in the civil case.

According to lawyers for Terraform, the SEC had “no evidence” that the platform’s or Kwon’s activities in the U.S. caused the losses at the center of the civil case. If the commission were to claim disgorgement and civil penalties, according to Terraform, it would give the regulatory a “territorially unlimited injunction.”

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Lawyers for Terraform claimed that seeking disgorgement from the platform would involve the Luna Foundation Guard, a “non-party” in the SEC’s civil case.

Lawyers representing Terraform Labs have filed a motion in opposition to a request from the United States Securities and Exchange Commission (SEC) for $5.3 billion in disgorgement and civil penalties against the firm and its co-founder Do Kwon.

In an April 26 filing in U.S. District Court for the Southern District of New York, Terraform’s legal team suggested that a court impose a maximum of a $1 million civil penalty after a jury ruled that the platform and Kwon were liable for fraud. Terraform argued the court “should not grant any injunctive relief or disgorgement” as the funds would effectively have to be obtained from the Luna Foundation Guard (LFG) — a “non-party” in the civil case.

“To pursue disgorgement from LFG, the SEC was required to name LFG as a defendant or relief defendant, which it did not do [...] This statute bars an order against TFL [Terraform Labs] to disgorge LFG funds because TFL did not receive them,” said the filing. “Those funds belong to LFG, not TFL, and the token sales from which they arose were conducted by LFG.”

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