Do Kwon, co-founder of blockchain company Terraform Labs, has defended himself against allegations of fraud brought by the US Securities and Exchange Commission (SEC). Kwon’s lawyers requested the dismissal of the lawsuit, arguing that the SEC’s allegations were unfounded and that US law prohibited regulators from asserting jurisdiction over the digital assets in question.
According to a Bloomberg report, Kwon’s lawyers stated that “US law prohibits the SEC from using federal securities law to assert jurisdiction over the digital assets in this case.” They also claimed that the SEC failed to prove that Kwon had defrauded US investors in connection with the collapse of Terra’s stablecoin, UST.
Kwon’s legal troubles began in March 2022 when he was arrested at Podgorica airport in Montenegro while allegedly attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested Kwon’s extradition. As of now, it remains unclear which country, if any, will be granted their extradition request.
Montenegrin Justice Minister Marko Kovač recently commented on the matter, stating 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.”
In addition to defending himself against the SEC’s allegations, Kwon’s lawyers also argued that the UST stablecoin is a currency, not a security. This claim is significant, as US securities law only applies to securities, not currencies.
The collapse of Terra’s UST stablecoin has been a point of controversy for some time. The stablecoin was designed to maintain a stable value of $1, but its value plummeted to $0.85 in late 2021. The collapse reportedly cost investors $40 billion.
While Kwon fights against the SEC’s allegations, another Terraform Labs co-founder, Shin Hyun-Seong, has managed to avoid legal trouble. The Seoul Southern District Court recently denied an arrest warrant for Shin, citing the unconfirmed nature of the allegations and the unlikeliness of Shin being a flight risk or destroying evidence.
In conclusion, the legal proceedings against Do Kwon and Terraform Labs are ongoing, and it remains to be seen how the case will be resolved. However, Kwon’s lawyers’ defense against the SEC’s allegations suggests that there may be significant legal challenges ahead for the regulatory agency.