Terraform Labs and Do Kwon Seek Dismissal of SEC’s Lawsuit

Terraform Labs and Do Kwon Seek Dismissal of SEC’s Lawsuit

Time Stamp: October 31, 2023 7:28 AM
Source Node: 2964187

Key takeaways:

Do Kwon has asked the judge to dismiss the federal securities regulator’s lawsuit alleging securities and fraud as it does not provide sufficient evidence of their wrongdoing.

The SEC asserted in its February lawsuit against Kwon that he transferred $10,000 worth of Bitcoin to a Swiss banking institution and removed $100,000.

Do Kwon, a co-founder of Terraform Labs, has asked a United States district judge to dismiss the federal securities regulator’s lawsuit alleging securities and fraud because it does not provide sufficient evidence of their wrongdoing.

Attorneys for Kwon and Terraform contended in a filing to a New York District Court on October 27 that the cryptocurrency Terra Luna Classic, TerraClassicUSD, Mirror Protocol, and its Mirrored Assets, which are on-chain reflections of stocks, are not securities, contrary to what the Securities and Exchange Commission (SEC) claimed. The attorneys stated:

“After two years of investigation, the completion of a discovery period that resulted in the taking of more than 20 depositions, and the exchange of over two million pages of documents and data, the SEC is evidentiarily no closer to proving that the Defendants did anything wrong,” 

The SEC “knew some of its allegations were false,” they said, adding that “evidence does not exist to support many of its claims.” One such claim was that Kwon and Terraform covertly shifted millions of dollars into Swiss bank accounts for personal gain.

The SEC asserted in its February lawsuit against Kwon and Terraform that the two transferred $10,000 worth of Bitcoin to a Swiss banking institution and removed $100,000. 

Additionally, it stated that they repeated deceptive and fraudulent assertions, which constituted fraud. Kwon’s attorneys claimed that the SEC knew this accusation was untrue when it filed this lawsuit. 

”This is made even worse by the undisputed fact that TFL had no customers, and thus no customer funds.”

In May 2022, the $40 billion Terra ecosystem ended when the USTC algorithmic stablecoin lost its peg to the US dollar.

Additionally, Kwon and Terraform tried to have the SEC’s experts’ opinions excluded, citing a paper by Bruce Mizrach, a professor of economics at Rutgers University, as “junk science.”

Terraform had attempted to dismiss the complaint, but Judge Jed Rakoff, who is in charge of the case, rejected it.

Kwon had already requested that the court deny the SEC’s request to extradite and conduct an interview with him in the United States. He is presently being held in Montenegro.

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