Lawyers representing Terraform Labs have filed a motion in opposition to a request from the United States Securities and Exchange Commission (SEC) for $5.3 billion in disgorgement and civil penalties against the firm and its co-founder Do Kwon.

In an April 26 filing in U.S. District Court for the Southern District of New York, Terraform’s legal team suggested that a court impose a maximum of a $1 million civil penalty after a jury ruled that the platform and Kwon were liable for fraud. Terraform argued the court “should not grant any injunctive relief or disgorgement” as the funds would effectively have to be obtained from the Luna Foundation Guard (LFG) — a “non-party” in the civil case.

“To pursue disgorgement from LFG, the SEC was required to name LFG as a defendant or relief defendant, which it did not do [...] This statute bars an order against TFL [Terraform Labs] to disgorge LFG funds because TFL did not receive them,” said the filing. “Those funds belong to LFG, not TFL, and the token sales from which they arose were conducted by LFG.”

Terraform claimed that $1 million in civil penalties would be “far more appropriate” than the SEC’s multibillion-dollar proposal. A separate filing from Kwon likewise opposed the commission’s motion but claimed that a proposed remedy of providing complete details of his accounts and assets would violate his Fifth Amendment rights against self-incrimination.

Related: Do Kwon appeals Montenegrin court decision, claiming ‘unfounded and illegal’ interpretation

On April 5, a jury found Terraform and Kwon liable for defrauding investors after a two-week trial with the SEC. At the time, a Terraform spokesperson told Cointelegraph that the firm was “carefully weighing [its] options and next steps.” Judge Jed Rakoff had not ruled on the proposed remedies at the time of publication.

Kwon was not present at the trial or verdict due to being restricted from traveling outside Montenegro. The Terraform co-founder was arrested in the country in March 2023 for using falsified travel documents. Local authorities are currently considering competing requests for extradition from the U.S. and South Korea.

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