Terraform Labs Co-founder Requests Rejection of SEC Lawsuit
Terraform Labs co-founder Do Kwon has urged a United States district judge to dismiss the securities and fraud lawsuit filed by the federal securities regulator. Kwon argues that the Securities and Exchange Commission (SEC) has failed to provide evidence of any wrongdoing on their part.
Challenging Allegations of Securities Violations
Kwon and Terraform’s lawyers submitted a filing to a New York District Court, asserting that their cryptocurrencies, including Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and its Mirrored Assets (mAssets), do not qualify as securities. They contest the SEC’s claims that these digital assets fall under the purview of securities regulations.
Lack of Evidence and False Allegations
The lawyers argue that despite a two-year investigation, extensive discovery procedures, and the exchange of millions of pages of documents, the SEC has failed to prove any wrongdoing. They claim that the evidence does not support many of the SEC’s allegations and accuse the regulator of making false claims, such as alleging that Kwon and Terraform moved funds into Swiss bank accounts for personal gain.
Fraud Accusations and Denial
The SEC’s lawsuit, filed in February, accuses Kwon and Terraform of sending 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrawing $100 million. The regulator also alleges that they engaged in fraudulent activities by making false statements. Kwon’s lawyers assert that these allegations are baseless since Terraform had no customers or customer funds.
Terra Ecosystem Collapse
The Terra ecosystem, valued at $40 billion, experienced a collapse in May 2022 when its USTC algorithmic stablecoin lost its peg to the U.S. dollar. This incident has likely influenced the SEC’s investigation and subsequent lawsuit against Kwon and Terraform.
Challenging SEC Experts
Kwon and Terraform have also moved to exclude the opinion of the SEC’s experts, including a report from Rutgers University economics professor Bruce Mizrach, which they deem as “junk science.” However, Judge Jed Rakoff, overseeing the case, previously denied Terraform’s attempt to dismiss the lawsuit.
Kwon’s Legal Situation
Currently detained in Montenegro, Kwon has previously requested the court to reject the SEC’s motion to extradite and interview him in the United States. The outcome of this ongoing legal battle will determine the future of Kwon and Terraform Labs in relation to the SEC’s allegations.
Hot Take: Challenging the SEC’s Allegations
Terraform Labs co-founder Do Kwon and his legal team are standing firm against the Securities and Exchange Commission’s accusations of securities violations and fraud. They argue that there is a lack of evidence supporting the SEC’s claims and that certain allegations are false. This case highlights the ongoing conflict between regulators and cryptocurrency projects regarding regulatory compliance. The outcome of this legal battle will have significant implications for the crypto industry and could potentially shape future regulations governing digital assets.
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