Terraform Labs co-founder defends against SEC allegations

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.


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Terraform Labs Co-Founder Argues Against SEC Lawsuit

In recent news, Terraform Labs co-founder Do Kwon’s lawyers have made arguments in court against the US Securities and Exchange Commission’s (SEC) lawsuit alleging that Kwon illegally offered unregistered securities to US investors. Kwon’s lawyers have requested the lawsuit be dismissed, citing that US law prohibits regulators from using federal securities law to assert jurisdiction over the digital assets in the case. According to Bloomberg, the lawyers also claim that the SEC has failed to prove that Kwon defrauded US investors in connection with the $40 billion collapse of TerraUSD (UST) and Luna (LUNA) cryptocurrencies. The lawyers argue that the stablecoin in question is a currency and not a security.

The legal proceedings began when Kwon was arrested in Podgorica airport, Montenegro, on March 23, while attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested the entrepreneur’s extradition. At present, it is unclear which country, if any, will be granted the extradition of Kwon.

The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong. Although prosecutors saw Kwon’s arrest as an opportunity to apprehend Shin, the court denied the request citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence.

Montenegrin Justice Minister Marko Kovač, through an interpreter, stated that determining to which state Kwon would be extradited would be based on several factors such as the severity of the committed criminal offense, the location and time when the criminal offense was committed, the order in which the request for extradition was received, and several other factors.

Terraform Labs, which is behind the development of the Terra blockchain and several stablecoins, has gained attention in the cryptocurrency industry in recent years. The company has been working on a variety of projects, including an online marketplace and decentralized finance applications. The SEC lawsuit against Kwon is just one of several legal battles that the company has been involved in, including a lawsuit filed by the South Korean financial watchdog against the company’s stablecoin, Terra.

In conclusion, the legal battle between Do Kwon and the SEC is ongoing, and the outcome remains uncertain. However, Kwon’s lawyers’ arguments that the stablecoin in question is a currency and not a security may have implications for the broader cryptocurrency industry. Additionally, the issue of Kwon’s extradition remains unresolved, and it is unclear which country, if any, will be granted the request for his extradition. The Terraform Labs legal battles highlight the regulatory challenges faced by the cryptocurrency industry as it continues to grow and develop.


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Nvidia Agrees to Pay $5.5 Million to SEC Fine for Failure to Crypto Mining Disclosures

Nvidia Corporation, a pioneer provider of graphics processors and related software, has agreed to pay a $5.5 million fine to settle the United States Securities and Exchange Commission (SEC) over allegations that the company failed to adequately disclose revenue from cryptocurrency mining. The Commission made the announcement on Friday.

According to the SEC, during two consecutive quarters in 2018, Nvidia did not make it clear that demand from crypto miners was responsible for a significant part of the rise in sales of its gaming graphics processing units (GPUs).

Nvidia’s powerful processors designed for handling video-game graphics are considered well-suitable for handling mining cryptocurrencies such as Bitcoin and Ethereum. Nvidia, the leading chipmaker in the US, agreed to the penalty without admitting or denying the regulator’s findings.

The SEC stated that Nvidia omitted the information about rising demand from crypto miners while making statements about how cryptocurrencies were affecting other business lines.

In a statement, Kristina Littman, head of the SEC’s crypto enforcement team, said: “All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”

The charges claim that Nvidia misled investors by reporting a boost in revenue associated with gaming activities but hide to reveal how much of such success was contributed by the volatile crypto market.

Based on Nvidia’s financial reports for the 2018 fiscal year, the SEC noted that Nvidia witnessed a massive increase in crypto mining-related sales in 2017, at a time when the rewards for mining Ethereum rose significantly.

Crypto mining was identified as the reason behind the scarcity of gaming GPUs in recent times. As a result, Nvidia launched a separate Cryptocurrency Mining Processor (CMP) line for mining in order to prevent shortages of the gaming GPUs.

However, many of Nvidia’s gaming GPUs were still being sold to miners as there was a significant rise in demand for such products from miners.

The commission stated that Nvidia didn’t mention mining-related sales as a factor in the success of its gaming division. The regulator said that Nvidia mentioned cryptocurrency as an important factor in other markets. This suggested to the SEC that Nvidia was being deceptive deliberately.

Considering crypto’s boom-and-bust nature, this implied that Nvidia’s sales figures didn’t indicate reliable growth for the future, making investing riskier.

“NVIDIA’s analysts and investors were interested in understanding the extent to which the company’s Gaming revenue was impacted by crypto mining and routinely asked senior management about the extent to which increases in gaming revenue during this time frame were driven by crypto mining,” the SEC stated.

Investor anxiety became real as a crypto crash in late 2018 compelled Nvidia to slash its quarterly revenues projections by a whopping $500 million and prompted a shareholder lawsuit.


Image source: Shutterstock


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Ripple sold twice as much XRP this quarter, as demand grows for its ODL service

Despite the ongoing legal battle with the Securities Exchange Commission, Ripple reported a 97% increase in sales of XRP for Q1.

Ripple posted its Q1 markets report on May 6th and revealed that total sales net of purchases had gone from $76.27 million in Q4 2020, to $150.34 million in Q1 this year.

Ripple noted the surge in sales was led by the growing demand for RippleNet’s working capital service On-Demand Liquidity or ODL:

“The increase in XRP sales can be attributed to deeper engagement from key ODL customers. For well over a year, Ripple has not sold programmatically.”

The firm added: “Ripple continued to engage in sales to support ODL and key infrastructure partners as part of providing increased XRP liquidity to improve the ODL experience of certain customers, eliminating the need for pre-funding and enabling instant global payments.”

According to CryptoCompare, total sales by Ripple accounted for just 0.07% of global XRP volume.

According to Ripple, ODL enables RippleNet clients to source instant liquidity in XRP that can be converted into international currencies within three seconds, removing the need to hold pre-funded accounts for international payments.

The company also reported that over the quarter, three billion XRP had been released from its massive escrow holdings — however 2.7 billion XRP had been returned to new escrow contracts.

Some have attributed XRP’s recent resurgence in part to Ripple labs’ purchase of a 40% stake in cross-border payments firm Tranglo, which was acquired to expand its ODL service into Southeast Asia.

Sheraz Ahmed, the host of the Crypto Valley Association podcast and managing partner at Storm Partners, a crypto and blockchain solutions provider, told Cointelegraph on April 9th that:

“XRP’s upward momentum is fueled by Ripple’s newly announced 40% stake in Asia’s leading cross-border payment processor, Tranglo. The partnership will undoubtedly increase Ripple’s exposure to the Asian market.”

Additionally, wallets holding between 1 million to 10 million XRP grew by 6.3%, up from 1,125 in Q4 to 1,196 in Q1.

The SEC case alleging Ripple Labs of selling unregistered securities worth $1.3 billion, does not appear to be preventing big players from increasing their holdings. The report revealed that the number of XRP whales had increased 3.5% in Q1. The firm posted data via Santiment, which showed “whale wallets” holding 10 million XRP or more increased from 308 in Q4 2020, to 319 in Q1 2021.

According to data from CoinGecko, the price of XRP is up 648% in the past 12 months. John Wagster, an attorney at Frost Brown Todd spoke with Cointelegraph on April 18th and attributed XRP’s mammoth gains to the bullishness in crypto markets in general, rather than to the firm’s recent set of legal wins in its defense of the SEC case.

In the past 24 hours more than $14 billion XRP changed hands and currently sits at a price of $1.59, with a market cap of $73 billion.


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Ripple Co-Founder Jed McCaleb Dumps 28 Million XRP Tokens amid SEC Lawsuit

Jed McCaleb, Ripple’s co-founder and its former Chief of Technology Officer (CTO), has seemingly resumed the sale of his XRP reserve, cashing out 28 million XRP.

McCaleb, along with Chris Larsen and Brad Garlinghouse, co-created and established Ripple Labs in 2012. The programmer went on to create the now defunct Bitcoin exchange Mt. Gox, as well as the Stellar Development Foundation responsible for the budding cryptocurrency Lumen (XLM). Before departing from Ripple, McCaleb was awarded 9 billion XRP, and an agreement was made that he was allowed to sell XRP, but only a certain amount per day.

Now, it seems as though the Ripple creator has resumed his XRP sales, after having been inactive for 25 days. Jed McCaleb’s first XRP sale since the SEC lawsuit is reported to be in the amount of 28.6 million XRP, which is worth around $8.8 million at the moment. The transaction was picked up by crypto researcher Leonidas Hadjiloizou, who pointed out that McCaleb had resumed his “tacostand” XRP sales. The analyst wrote:

“Jed has paused his sales in the past, to allow a charity he had donated XRP to, to sell. This time, however, he paused his sales right after the lawsuit. There is no way to know why he resumed. He could have waited for some advice from his lawyers or for a million other reasons.”

The researcher also noted that McCaleb was going to sell another 9.7 million XRP in the near future.

This has been speculated upon as a means for the co-founder to be rid of his XRP reserves, especially as the token keeps depreciating in light of the SEC lawsuit.

McCaleb resumes XRP sales, stirring whispers

The US Securities and Exchange Commission had charged Ripple Labs, along with co-founder Chris Larsen and CEO Brad Garlinghouse, for selling XRP tokens since 2013 without filing an official registration of them as securities. The fact that the tokens are released from escrow and that all the lead executives of Ripple have benefitted from XRP sales personally have been critiqued as illegitimate. Many have raised their eyebrows and questioned how truly decentralized this made XRP.

While some have hypothesized that McCaleb’s goal is to be rid of XRP before the token plummets to new depths and it is too late to be rid of one’s reserves, others have speculated that McCaleb resuming his sales are indicative of bullish sentiment. In fact, some in the cryptocurrency community have taken it to mean that XRP’s outcome will be positive despite the current lawsuit. A pseudonymous crypto advocate said:

“well, if Jed stopped his sales because of sec concerns, the fact that he is restarting sales now means those concerns are probably resolved in a positive manner.”

In any case, it may be too early to speculate on what McCaleb’s intentions are. For the time being, XRP has fallen below the critical psychological level of $0.30 once again. The token has dropped considerably in price since many crypto exchanges have moved to halt XRP trades for their US customers, in fear of being impacted by the Commission’s lawsuit. 

The pretrial opposing the SEC and Ripple Labs is set for February 22, and both sides are expected to present arguments for the case, such as potential motions and settlements.

Image source: Shutterstock


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