A US federal judge has ruled that Terraform Labs CEO Do Kwon violated securities law by selling company shares without permission. According to the judge’s ruling, Kwon had prearranged a “wash sale” of more than $13 million worth of Terraform Labs stock via a London-based investment firm. The court documents stated that Kwon had sold the shares without adequate warning to investors. The case was brought against Kwon by the US Securities and Exchange Commission (SEC) in April 2020.
The judge also ruled that Kwon had failed to give investors adequate disclosure regarding the sale of the stock and that this had hindered their ability to make an informed transactional decision. According to the judge’s ruling, Kwon has been ordered to pay a $1.1 million civil money penalty, $2.5 million in disgorgement, plus interest on the disgorgement. Additionally, Kwon has been barred from acting as an officer or director of any public company for at least seven years.
The SEC’s investigation was ordered following the collapse of Terraform Labs in March 2019. Kwon was charged alongside other members of the company’s board, including co-founder Jen Myers. Kwon had previously been reprimanded by the SEC in 2018 for misleading investors regarding Terraform’s fundraising activities.
This ruling serves as a warning to other industry leaders who do not follow the law. The SEC is committed to ensuring the protection of investors in the US capital markets and will continue to take action against those who violate securities laws.
