Key Insights
- Do Kwon’s lawyers allegedly argued against SEC’s charges.
- They maintained that the SEC’s accusations were baseless.
- Do Kwon is charged with alleged fraud in the $40 billion UST and LUNA crash.
According to Bloomberg report lawyers of Terraform Labs co-founder Kwon Do-Hyung (Do Kwon) has requested that the judge to dismiss the SEC lawsuit. They argued on the premise that the regulator’s allegations were untrue.
SEC’s Allegations Against Do Kwon
The SEC charged Do Kwon and Terraform Labs with swindling investors in a multi-billion dollar plot. Terraform Labs was the primary developer of two cryptos, TerraUSD (UST) and LUNA, which crashed.
Do Kwon raised many funds from investors starting in 2018 by selling digital assets, which the SEC asserted as unregistered securities. As time passed, UST – a stablecoin that got its value via another paired token, LUNA – grew to the tenth largest crypto.
Eventually, UST lost its $1 peg, and both tokens almost lost all their value. Per the SEC’s criticism, investors felt lied to by Terraform Labs that the tokens would appreciate.
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Investors lost more than $ 40 billion worldwide after UST and LUNA crashed. Hence, Terraform Labs got sued by the SEC.
Almost a month after Do Kwon was arrested, his lawyers have reportedly refuted the SEC’s fraud claims.
Do Kwon’s Lawyers Stand Against the SEC
Do Kwon’s lawyers, on April 21, petitioned the judge to brush off the SEC lawsuit. The basis of their argument was that the regulators’ allegations were unfounded.
The SEC had charged Do Kwon for reportedly defrauding U.S. investors by criminally offering unregistered securities. But on the other hand, the lawyers maintained that UST stablecoin is a currency, not a security.
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Furthermore, they said U.S. law prevents regulators “from using federal securities law to assert jurisdiction over the digital assets in this case.” There were additional claims that the SEC could not prove that Do Kwon had duped U.S. investors regarding the $40 billion crash of UST and LUNA.
In South Korea, Do Kwon has also been accused of fraud by breaking the country’s capital markets law. Five Korea-based crypto investors with joint damages of $1.1 million lodged complaints against the Terraform founders over infringements of financial rules.
The Seoul Southern District Court failed to approve an arrest warrant for the other Terraform Labs co-founder Shin Hyun-Seong. This is because they weren’t convinced of the allegations, plus the improbability of Shin being a flight risk.
Since Do Kwon got arrested in Montenegro, South Korean and American authorities have called for his extradition. But, up until now, their requisitions have yet to be granted.
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“In the case when we receive several extradition requests, I would like to say that determining to which state they will be extradited is based on several factors like the severity of the committed criminal offense, the location and time when the criminal offense has been committed, the order in which we have received the request for extradition and several other factors,” said Montenegrin Justice Minister Marko Kovac in March.
