- Terraform Labs co-founder challenges SEC’s lawsuit, alleging lack of evidence.
- Do Kwon refutes SEC’s claims about cryptocurrency securities.
- Legal battle over Terra ecosystem collapse unfolds, with significant implications.
In a significant legal development, Do Kwon, the co-founder of the now-collapsed Terraform ecosystem, makes a move to challenge the SEC. In detail, he has moved to dismiss the securities and fraud lawsuit filed against him and Terraform Labs by the U.S. Securities and Exchange Commission (SEC). In particular, Kwon asserts that the SEC has failed to provide evidence of wrongdoing.
Kwon and Terraform Labs’ lawyers submitted a filing on October 27 to a New York District Court, arguing that the cryptos at the center of the lawsuit, including Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and Mirrored Assets (mAssets), do not qualify as securities, as claimed by the SEC. They emphasized the lack of concrete evidence supporting the SEC’s allegations after an extensive two-year investigation.
In addition, the legal team also accused the SEC of knowingly making false allegations, specifically regarding the movement of funds to Swiss bank accounts for personal gain. The lawsuit, filed in February, alleges that Kwon and Terraform sent 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrew $100 million, accompanied by fraudulent and misleading statements.
Kwon’s lawyers contend that the SEC was aware of the falseness of certain allegations at the time of filing. The collapse of the $40 billion Terra ecosystem in May 2022, partly due to the loss of the U.S. dollar peg by its algorithmic stablecoin, remains a central issue in the case.
Kwon and Terraform Labs are also contesting the validity of the SEC’s experts’ opinions, including a report by Rutgers University economics professor Bruce Mizrach. The presiding judge, Jed Rakoff, previously denied Terraform’s efforts to dismiss the lawsuit.
Kwon is currently detained in Montenegro and has sought to oppose the SEC’s motion for his extradition and an interview in the U.S. This legal battle is seen as a critical test case in the crypto industry and could significantly impact the regulatory landscape.
