Terraform Labs CEO Kwon Do-hyung, a key figure in Terraform Labs, agreed with the U.S. Securities and Exchange Commission to return the $4.47 billion fine to the U.S. The amount is less than the $5.26 billion originally set by the SEC. The SEC has asked a U.S. federal court to approve the deal with Kwon. If the court approves, it will ban Terraform Labs from trading in cryptocurrencies and select a trustee who will return the remaining Terraform Labs assets to the victim.
The SEC filed a civil suit in 2021 alleging that Terraform Labs caused huge losses to investors by deceiving them that it was safe. Kwon lost in April this year, though he argued that there was no basis for U.S. authorities to be fined because most of the cryptocurrency issuance and sale took place outside the U.S. It is not known if the SEC will actually receive the money. According to Terraform Labs data filed in a U.S. court in April, the company’s debt is $450.9 million, which is more than its assets. The priority of Terraform Labs assets rests with creditors, not the SEC. The trial could have gone ahead if the defendant was not obligated to appear in person.
Kwon has been detained in Montenegro, the Balkans, since March last year on charges of falsifying his passport. Attention is focusing on where the funds will be used and how South Korea will handle extradition in court to bring him back. It is unclear which country the Montenegro authorities will repatriate at a time when they delay making a final decision. Kwon wants to go to South Korea, where the sentence for financial fraud is relatively low.
EJ SONG
US ASIA JOURNAL
