December 11, 2023

SEC seeks summary judgment in Do Kwon and Terraform Labs case

The United States Securities and Exchange Commission (SEC) has refuted the jury’s conclusion regarding Terraform Labs’ alleged violations and has demanded a summary judgment on all the claims. 

A court filing from Oct. 27 showed the SEC’s reluctance to accept the jury’s leniency toward Do Kwon and his involvement in facilitating the frauds that eventually led to the collapse of the Terra ecosystem. The filing in the U.S. District Court for the Southern District of New York read:

“No rational jury could conclude that Kwon was not liable for Terraform’s violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder pursuant to Exchange Act Section 20(a).”

The “evidence” of violations provided by the SEC points to Kwon’s involvement in misleading crypto investors by creating and marketing Terra and its in-house Terra (LUNA) tokens as securities.

SEC seeks summary judgment in Kwon and Terraform Labs case. Source: CourtListener

On the same day, Kwon and Terraform Labs asked the judge to toss the SEC’s lawsuit, arguing that Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and its mirrored assets (mAssets) are not securities as the SEC alleged.

However, the SEC maintains that Kwon and Terraform Labs offered and sold securities, sold LUNA and MIR in unregistered transactions, engaged in transactions involving mAssets and committed fraud.

Related: Terraform co-founder Shin blames protocol for collapse during trial in S. Korea

While Terra co-founder Daniel Shin’s lawyer blamed the “unreasonable operation of the Anchor Protocol and external attacks carried out by Do-hyung Kwon” for the Terra ecosystem collapse, the company recently blamed market maker Citadel Securities for its role in an alleged “concerted, intentional effort” to cause the depeg of its TerraUSD (UST) stablecoin in 2022.

Screenshot from the filing by Terraform compelling Citadel to provide additional documents. Source: CourtListener

Citadel Securities told Cointelegraph in a statement: “This frivolous motion is based on false social media posts and ignores information we already provided confirming we had no role whatsoever in this matter.”

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