Terraform Labs' lawyers push back against SEC, argue token sales were mostly outside US

Lawyers for Terraform Labs pushed back against the Securities and Exchange Commission after the agency requested them to pay billions of dollars in fines. 

Terraform's offer and sales of tokens happened "almost entirely outside the U.S." the firm's lawyers argued in a brief filed on Wednesday. Meanwhile, the SEC has argued that the firm "targeted U.S. investors" and says they should pay $5.3 billion in fines , most of that being in disgorgement. 

"... The SEC has submitted no evidence that Defendants’ limited activities in the U.S. directly caused any losses, much less the billions the SEC seeks in disgorgement," lawyers for Terraform said on Wednesday. 

The SEC charged Terraform and co-founder Do Kwon in February 2023 over the algorithmic stablecoin Terra USD (UST), which collapsed dramatically a year earlier. Last month, a jury found that both Terraform and Kwon misled investors and were found liable for civil fraud.

Algorithmic stablecoins use market incentives via algorithms to maintain a stable price. Terra was linked to Luna, a governance token used to stabilize prices. UST crashed in May 2022, wiping out more than $50 billion.

Up to bat

The SEC cited Terraform's logo at baseball stadium Nationals Park in Washington, D.C., as proof that the firm was looking to be in the U.S. The firm signed a partnership deal with the baseball team there in February 2022, according to multiple news reports. 

"Terraform so wanted to ingratiate itself into American society that it paid more than $38 million to prominently display its logo at a ballpark where America’s favorite pastime is played in America’s capital city," the SEC said in a brief filed in late April. 

Terraform said that that move was not significant. 

"Thus, in light of the at most small number of domestic purchases proved by the SEC, displaying TFL’s logo at a baseball stadium in Washington, D.C., did not have a substantial effect within the U.S.," Terraform's lawyers said on Wednesday.