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- 1 The lawsuit of the SEC against Terraform Labs’ co-founder has recently seen a development.
- 2 In a filing on October 27th, it was noted that Kwon and Terraform Labs’ lawyers cited that the company’s assets are not securities.
The SEC filed a lawsuit against Terraform Labs’ co-founder Do Kwon saw a development recently. The legal team of the fugitive executive of the crypto firm asked the judge to reject allegations of securities and fraud. These allegations were brought forward by the financial regulator during the lawsuit and now the defendant is defying the claims.
In a filing on October 27, 2023, in the New York district court, the lawyers representing Kwon and Terraform Labs stated that the company’s assets are not securities citing the SEC’s allegations. These digital assets include Terra Luna Classic (LUNC), Terra Classic USD (UST), Mirror Protocol (MIR), and Mirrored Assets (mAssets).
According to statements made by their legal representatives, the SEC carried out an exhaustive two-year investigation, marked by a comprehensive discovery period involving more than 20 depositions and the exchange of over two million pages of documents and data. Despite these efforts, it remains unable to confirm its allegations against the defendants.
The legal team asserted that “the evidence does not exist to support many of the SEC’s claims.” They further contended that the regulatory body was aware of the falseness of certain allegations.
Specifically, the lawyers highlighted an accusation that Sang-Ho Kwon and Terraform, the entities at the center of the SEC’s legal action, had covertly funneled millions into Swiss bank accounts for personal gain.
SEC Brought Lawsuit Against Kwon and Terraform Labs
In the lawsuit initiated by the SEC against Kwon and Terraform back in February, the regulatory authority alleged that the Defendants had transferred a substantial sum of 10,000 Bitcoin (BTC) to a Swiss financial institution, subsequently withdrawing $100 Million. Additionally, the SEC accused them of committing fraud by repeatedly disseminating false and misleading statements.
The defendants’ legal team has vigorously pushed back against these claims, asserting that the SEC was fully aware of the falsehood of the allegations at the time of filing the lawsuit. Moreover, the lawyers emphasized a pivotal point in the case – Terraform (TFL) had no customers, and therefore, there were no customer funds involved, a fact that further challenges the basis of the SEC’s allegations.
The case under the jurisdiction of Judge Jed Rakoff has been marred by legal wrangling, and Terraform’s earlier attempt to have the lawsuit dismissed was denied. The complexity of the case continues to evolve, with Kwon’s legal status being a subject of ongoing dispute.
Currently detained in Montenegro, Kwon has persistently appealed to the court to reject the SEC’s motion for his extradition and subsequent interview in the United States.
The case revolves around Terraform and its founder, Sang-Ho Kwon, and is emblematic of the challenges posed by the burgeoning cryptocurrency industry for regulatory authorities.
Terraform, with its ecosystem valued at an astonishing $40 Billion, experienced a catastrophic collapse in May 2022. The collapse was precipitated by the de-pegging of its algorithmic stablecoin, USTC, from the U.S. dollar.
The protracted legal battle raises questions about the efficacy and scope of regulatory oversight in the rapidly evolving and decentralized world of digital assets. It underscores the importance of evidentiary rigor in legal proceedings and the delicate balance between innovation and investor protection in the cryptocurrency space.
As the case against Kwon and Terraform unfolds, it will be closely watched for its potential implications on future regulatory actions within the crypto industry.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
