Kwon and Terraform Labs Request Dismissal of SEC Lawsuit

Terra Classic Do Kwon

Do Kwon, co-founder of the now-collapsed Terraform ecosystem, maintains that he and his firm did not evade U.S. securities laws.


Terraform Labs Co-Founder Defends Against SEC Suit

Do Kwon, co-founder of Terraform Labs, has requested a U.S. district judge to dismiss the securities and fraud lawsuit filed by the federal securities regulator. Kwon’s defense argues that the Securities and Exchange Commission (SEC) has failed to provide evidence of any wrongdoing.

In a filing made on October 27 to a New York District Court, lawyers representing Kwon and Terraform contested the SEC’s claim that their cryptocurrencies, including Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and Mirrored Assets (mAssets), which represent stocks on the blockchain, are securities.

The lawyers emphasized that the SEC’s two-year investigation, extensive discovery period with over 20 depositions, and the exchange of more than two million pages of documents and data have not produced evidence to support many of the SEC’s allegations. They further claimed that the regulator was aware that some of their allegations, such as the accusation of Kwon and Terraform moving millions into Swiss bank accounts for personal gain, were false.

SEC’s Suit Against Kwon and Terraform

In a lawsuit filed by the SEC in February, it was alleged that Kwon and Terraform sent 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrew $100 million. The SEC also accused them of fraud, claiming they made false and misleading statements.

Kwon’s lawyers argued that the SEC knew the accusation was false when they filed the case, and this was aggravated by the fact that Terraform Labs had no customers and, consequently, no customer funds.

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The Terra ecosystem, valued at $40 billion, collapsed in May 2022, mainly because its algorithmic stablecoin, USTC, lost its peg to the U.S. dollar.

Kwon and Terraform sought to exclude the opinions of the SEC’s experts, including a report from Rutgers University economics professor Bruce Mizrach, which they referred to as “junk science.”

The judge overseeing the case, Judge Jed Rakoff, had previously denied Terraform’s attempt to dismiss the lawsuit.

Kwon is currently detained in Montenegro and has previously requested the court to reject the SEC’s motion to extradite him and conduct interviews in the U.S.

Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.

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