The US Securities and Exchange Commission (SEC) is seeking fines totaling nearly $5.3 billion from Terraform Labs and its former CEO, Do Kwon, for alleged violations of US securities laws and fraud charges.

In an April 19 legal filing, the SEC detailed its request, which includes $4.2 billion in disgorgement and $545.7 million in prejudgment interest. The disgorgement aims to reclaim profits from token sales to institutional investors, sales via a Luna Foundation Guard contract with Genesis Asia Pacific, and sales on crypto exchanges between June 2021 and May 2022.

The regulator is also seeking civil penalties, proposing a $420 million fine against Terraform Labs and a $100 million fine against Kwon. The SEC considers these penalties as punishment and deterrence, despite being a fraction of the alleged ill-gotten gains.

Additionally, the SEC requested nonmonetary remedies, including injunctions to prevent further violations of securities laws and conduct-based injunctions preventing the defendants from engaging in certain transactions involving crypto asset securities, including Terra-related tokens like UST, MIR, LUNA, wLUNA, and LUNA 2.0. It also aims to prevent Terraform Labs from discharging its monetary obligations through bankruptcy.

The agency intends to permanently bar Kwon from serving as an officer or director of a publicly held company and require him to provide a sworn accounting.

In response, Terraform Labs' legal team argued that remedies should only apply to token sales proven to have occurred in the US, emphasizing that most conduct and sales happened outside the US. They also disputed the SEC's entitlement to disgorgement, citing a lack of pecuniary harm or out-of-pocket loss.

Kwon and his legal representation similarly denied evidence of ill-gotten gains and argued against the requested civil penalties, suggesting lower amounts.

Both parties also contested the necessity of injunctions, claiming that further violations are unlikely based on current circumstances.

The SEC filed charges against Terraform Labs and Do Kwon in February 2023, with the trial beginning in March and the court finding both parties liable for fraud in April.