Do Kwon and Terraform Labs ask judge to toss SEC’s lawsuit
Terraform Labs co-founder Do Kwon has requested a United States district judge to reject the securities and fraud suit from the federal securities regulator, claiming it has failed to prove they did anything wrong.
In an Oct. 27 filing to a New York District Court, lawyers for Kwon and Terraform argued its cryptocurrencies Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and its Mirrored Assets (mAssets) that reflect stocks on-chain are not securities as the Securities and Exchange Commission alleged.
“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 lawyers wrote.
They added the “evidence does not exist to support many of the SEC’s claims” and asserted the regulator “knew some of its allegations were false” — in particular, an allegation that Kwon and Terraform secretly moved millions into Swiss bank accounts for their own gain.
Kwon’s lawyers claimed the SEC is trying to draw parallels between Terraform and FTX. Source: CourtListenerIn its suit against Kwon and Terraform filed in February, the SEC claimed the pair sent 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrew $100 million. It also claimed they committed fraud by “repeating false and misleading statements.”
“The SEC knew this allegation was false when it filed this case,” Kwon’s lawyers wrote. ”This is made even worse by the undisputed fact that TFL had no customers, and thus no customer funds.”
The $40 billion Terra ecosystem collapsed in May 2022 after its USTC algorithmic stablecoin lost its U.S. dollar peg.
Related: Terraform co-founder Shin blames protocol for collapse during trial in S. Korea
Kwon and Terraform also moved to exclude the opinion of the SEC’s experts including a report from Rutgers University economics professor Bruce Mizrach which they called “junk science.”
Judge Jed Rakoff, who oversees the case, denied Terraform’s earlier attempt to toss the lawsuit.
Kwon is currently detained in Montenegro and has previously asked the court to reject the SEC’s motion to extradite and interview him in the U.S.
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