by Matthew Russell Lee, Patreon Substack
SDNY COURTHOUSE, June 13 – The SEC's trial against Terraform Labs began on March 25. Inner City Press was there, thread. On November 17, 2023 US District Court for the Southern District of New York Judge Jed S. Rakoff held a hearing on potential trial experts. Inner City Press live tweeted that too, thread.
More on Substack here
Ten days later on April 5, Judge Rakoff gave legal instructions to the jury for deliberation, including that "I instruct you as a matter of law that the tokens known as UST, LUNA, and wLUNA are securities." Full 24 page legal instructions to jury on Patreon here.
And then the verdict: Liable, liable, liable - and reckless, not intentional.
On April 19 the SEC filed a motion for injunction against violations, and $4 billion disgorgement, to fine Terraform Labs $420 million and Do Kwon $100 million. Motion on Patreon here.
On May 30, after an unceremoniously canceled May 29 proceeding, this: "Minute Entry for proceedings held before Judge Jed S. Rakoff: Telephone Conference held on 5/29/2024,without transcription or recording. Counsel for all parties was present. The oral argument previously set for 5/29/2024 has been cancelled because the parties have informed the Court that they reached a settlement in principle. The parties must file, by 6/12/2024, papers in support of a proposed final judgment consistent with the settlement."
On June 12, Judge Rakoff approved it: "FINAL JUDGMENT AGAINST DEFENDANTS TERRAFORM LABS PTE LTD. AND DO HYEONG KWON: IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants are permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security: As further set forth in this Order. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Terraform is liable for disgorgement totaling $3,586,875,883, which represents net profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $466,952,423. Of these amounts, Kwon is jointly and severally liable with Terraform in the amount of $110,000,000 of disgorgement, plus prejudgment interest thereon in the amount of $14,320,196. Pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)], the Court further imposes a civil penalty on Terraform of $420,000,000. The $4,473,828,306 in total monetary remedies against Terraform shall be payable as provided for in the confirmed Chapter 11 Plan in the Bankruptcy Case, as set forth in the following paragraph. As further set forth in this Order. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Kwon is liable for disgorgement totaling $110,000,000, together with prejudgment interest thereon in the amount of $14,320,196. Pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)], the Court further imposes a civil penalty on Kwon of $80,000,000. Kwon shall begin to satisfy these obligations by directly transferring to the bankruptcy estate in the Bankruptcy Case, assets and funds as set forth in the next paragraph herein. Payment of the monetary remedies against Kwon shall be deemed satisfied, provided that all transfers by Kwon to the SEC and the Terraform bankruptcy estate in the Bankruptcy Case total no less than $204,320,196, excluding the value of any Terraform Crypto Assets transferred to the Terraform bankruptcy estate, only if and until Kwon completes: (1) transferring into an escrow account agreed by Kwon and the Commission staff $4,700,000 within 30 days of Final Judgment as set for the above; (2) transferring into an escrow account agreed by Kwon and the Commission staff $2,300,000 of assets belonging to Kwon in accounts at Sygnum Bank of Zurich, Switzerland, associated with Portfolio Number 84.002.088-00, within 30 days of Final Judgment; (3) transferring to the Terraform bankruptcy estate in the Bankruptcy Case within 30 days all crypto assets of the Luna Foundation Guard, which shall first be applied to satisfy the disgorgement amount and prejudgment interest with any remaining assets applied to the civil penalty amount; As further set forth in this Order. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED all parties have knowingly and voluntarily consented to waive the right, if any, to appeal from the entry of this Final Judgment. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. (Signed by Judge Jed S. Rakoff on 6/12/2024)."
More on X for Subscriber here & Substack here
The case is Securities and Exchange Commission v. Terraform Labs Pte Ltd. et al., 23-cv-1346 (Rakoff)
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