Terra founder Do Kwon seeks to dismiss SEC fraud lawsuit

Terraform Labs co-founder Do Kwon has filed a request with a United States district judge to dismiss the United States Securities and Exchange Commission’s (SEC) securities and fraud lawsuit.

The argument primarily centers on the assertion that the SEC has failed to provide sufficient evidence to support its claims. The co-founders maintain that their cryptocurrencies, such as Terra Classic (LUNA), TerraClassicUSD (USTC), Mirror Protocol (MIR), and mirrored assets (mAssets), do not meet the criteria of securities, as alleged by the SEC.

Furthermore, Kwon and Terraform’s legal team claimed that the SEC was aware that some of its allegations were baseless, specifically referencing an accusation that they had secretly transferred millions of dollars into Swiss bank accounts for personal gain.

“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.

Kwon’s lawyers also argue that it is impossible to bring him to the U.S. because he is detained indefinitely in Montenegro, and providing written testimony would violate his due process rights under the federal law.

The SEC requested permission from the court to interview Do Kwon, the founder of Terraform Labs, about the Terra and Luna stablecoin collapse. The agency alleges that Terraform Labs misled investors about the safety of its TerraUSD stablecoin, which crashed in May 2022, causing massive losses for investors.

The SEC is seeking to interview Kwon before the discovery cut-off date of October 13 as part of its ongoing investigation.

Back in June, Do Kwon was handed a four-month prison sentence by a court in Montenegro for allegedly using a false passport. Han Chong-joon, Kwon’s associate and Terra’s former finance officer, faced similar charges of fabricating official documents and was sentenced to the same four-month prison term. The Montenegro Basic Court stated on its website that the duration of their pretrial detention would be considered in the sentencing process.

Do Kwon, who is currently facing allegations of multibillion-dollar fraud in the United States and is also wanted by South Korean authorities on similar charges, was apprehended in March. The arrest occurred at the airport in Podgorica, the capital of Montenegro, as he was attempting to board a flight to Dubai. As it happens, he was then taken into custody on suspicion of his identity by local police.