Highlights
Coinbase’s Chief Legal Officer, Paul Grewal, has criticized the Securities and Exchange Commission’s (SEC) $4.47 billion settlement with Do Kwon and the now-bankrupt Terraform Labs. Grewal raised concerns about the settlement’s ability to offer practical solutions to Terraform’s victims.
Paul Grewal expressed his doubts on the effectiveness of the settlement on X (formerly Twitter) and criticized the SEC for the way they approached the case. He noted that the settlement only requires the SEC to be treated as an unsecured creditor in Terraform’s bankruptcy case and makes Kwon surrender only $7 million of his assets.
Moreover, according to Grewal, this does not go a long way in providing adequate compensation to the victims of Terraform’s fraudulent practices that saw many lose money.
Piling on the conversation, other influential personalities in the crypto space have shared similar opinions. Ki Young Ju, CEO of CryptoQuant, stated that it was unrealistic for Terraform Labs to possess such funds for the settlement, raising doubts about the legitimacy of their financial activities. Ki’s comments, as a result, give a perspective into the general suspicion within the crypto space about Terraform Labs’ transparency and moral standards.
Ripple CLO Stuart Alderoty also joined the fray and accused the SEC of “touting a big penalty” again. Alderoty seems to draw a connection with the SEC asking a $2 billion fine from Ripple. Moreover, he remarked, “But the SEC actually will end up a creditor in bankruptcy court (see BlockFi). The SEC has become a show regulator chasing headlines rather than good policy.”
The settlement agreement requires Terraform Labs to pay the SEC $3.58 billion in disgorgement and $420 million in civil penalties. This comes after a jury in April ruled that Do Kwon and his firm had defrauded investors in their cryptocurrency products.
The case which is being presided over by Judge Jed Rakoff of the U. S. District Court for the Southern District of New York, has come to a crucial decision by filing the settlement terms.
However, the crypto community and industry leaders are worried about how the settlement funds will be distributed and where they will end up. Zach Rynes, a community liaison at Chainlink, also expressed discontent with the fact that the settlement will be paid to the SEC instead of the affected people of Terra’s collapse.
This criticism, consequently, can be associated with the emerging discourse concerning the necessity of increasing the focus of regulatory measures on investor protection and the return of stolen funds.
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