Terraform Labs Co-Founder Do Kwon Challenges SEC Lawsuit, Asserts Innocence
Summary:
Do Kwon, co-founder of Terraform Labs, and his lawyers have requested dismissal of a lawsuit by the U.S. Securities and Exchange Commission (SEC). They contend that the SEC has failed to substantiate its claims that the firm's cryptocurrencies acted as securities. The team also denies the SEC's allegations of fraudulent activity, including the improper transfer of funds into Swiss bank accounts. This follows the failure of Terraform's $40 billion ecosystem in May 2022, after its USTC algorithmic stablecoin lost its dollar peg. Kwon, currently in detention in Montenegro, also seeks to prevent extradition and interrogation in the U.S.
Do Kwon, co-founder of Terraform Labs, has made an appeal for a U.S. District Judge to dismiss the fraud and securities lawsuit lodged by the country's federal security watchdog, defending his innocence. On October 27th, his legal representatives submitted to a New York District Court, arguing that accusations against Kwon and Terraform of their cryptocurrencies - Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and Mirrored Assets (mAssets) being securities - by the Securities and Exchange Commission (SEC) were unfounded.
Despite exhaustive efforts by the SEC, involving two years of thorough investigation, more than 20 depositions, and the exchange of over two million documentation pages and data, the commission still hasn't produced compelling evidence proving the guilt of the defendants, according to Kwon's legal team. They further assert the SEC's accusations lack adequate supporting evidence and that the regulatory authority was aware of certain falsities in its allegations. In particular, they point to the SEC's claim that Kwon and Terraform unlawfully transferred large sums into Swiss bank accounts for personal gain.
The defensive position of Kwon’s legal team includes the perspective that the SEC is inappropriately drawing parallels between Terraform and another platform, FTX. Previous allegations by the SEC, filed in February against Kwon and Terraform, indicated the duo had transferred 10,000 Bitcoin (BTC) to a Swiss financial entity and extracted $100 million, while making fraudulent and deceptive claims. The legal team for Kwon and Terraform rebuts this, arguing that no evidence supports these accusations, emphasizing the fact that Terraform had no customer-base or customer funds to misuse.
Regrettably, the Terra ecosystem, valued at $40 billion, crumbled in May 2022 following the devaluing of its USTC algorithmic stable coin. Further in their rebuttal, the defendants Kwon and Terraform made a request to dismiss the opinion of the SEC's experts, including a particular report by Rutgers University economics professor Bruce Mizrach, labelling it as "junk science."
Presiding Judge Jed Rakoff rejected Terraform's previous appeal to discard the lawsuit. Currently, Kwon is being held in Montenegro and had earlier appealed to the court to decline the SEC's request to extradite and question him in the U.S.
Published At
10/31/2023 2:56:16 AM
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