Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The US Securities and Exchange Commission is pushing for collapsed cryptocurrency firm Terraform Labs and its co-founder Do Kwon to pay more than $5bn in fines and interest, after both were found liable for fraud earlier this month.
The regulator has requested a penalty of just under $4.2bn, alongside an additional $545mn in prejudgement interest, according to a recent filing to the Southern District of New York. It also wants Terraform Labs and Kwon to pay $420mn and $100mn respectively in civil penalties.
Terraform Labs collapsed in May 2022 after its flagship crypto token TerraUSD — which was designed to track the price of the dollar — lost its peg, triggering a crisis in the wider digital assets market that wiped out several companies and pushed the price of tokens such as bitcoin to multiyear lows.
The fines pile the pressure on Kwon who, alongside Terraform Labs, was found liable in a US civil court for defrauding cryptocurrency investors in a scheme that allegedly triggered $40bn in losses.
Terraform Labs had said it was “disappointed” with the verdict and claimed the SEC did not have the legal authority to bring its case.
Both parties “caused devastating losses for investors and wiped out tens of billions of market value nearly overnight”, said the SEC’s director of enforcement Gurbir Grewal after the verdict.
Kwon is in the middle of an extradition battle between the US and South Korea. Last year US prosecutors filed eight criminal counts against him including securities, commodities and wire fraud. South Korea issued an arrest warrant for him in September 2022, alleging he violated capital market rules in the country.
Kwon has been held in Montenegro since June last year, when he was found trying to leave on a forged passport. He did not attend the civil trial in New York.
Meanwhile, the US Department of Justice has argued for former Binance chief executive Changpeng Zhao to spend three years in prison and pay a $50mn fine, according to a sentencing memo earlier this week.
Zhao pleaded guilty last year to a criminal charge of failure to protect against money laundering and stepped down from his leadership post at Binance. The exchange agreed to pay more than $4.3bn in penalties and pleaded guilty to criminal charges relating to money laundering and breaching international financial sanctions.
“Zhao’s sentence should reflect the gravity of his crimes,” said the DoJ this week.
