Do Kwon and Terraform Labs ask Judge to Toss SEC’s Lawsuit – Do Kwon, co-founder of Terraform Labs, has urged a United States district judge to dismiss a securities and fraud lawsuit filed by the United States Securities and Exchange Commission, asserting that the SEC has not demonstrated any wrongdoing on his part or his company’s behalf.
In a filing dated October 27, submitted to the U.S. District Court for the Southern District of New York, Kwon and Terraform’s legal team contended that their cryptocurrencies, including Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and their mirrored assets (mAssets) – which represent stocks on-chain – do not qualify as securities, as alleged by the SEC.
“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.
They added the “evidence does not exist to support many of the SEC’s claims,” asserting the regulator “knew some of its allegations were false” — in particular, an allegation that Kwon and Terraform secretly moved millions into Swiss bank accounts for their own gain. In the lawsuit brought against Kwon and Terraform in February, the SEC alleged that they transferred 10,000 Bitcoins to a Swiss financial institution and subsequently withdrew $100 million.
It also claimed they committed fraud by “repeating false and misleading statements.” “The SEC knew this allegation was false when it filed this case,” Kwon’s lawyers wrote. “This is made even worse by the undisputed fact that TFL had no customers, and thus no customer funds.” The Terra ecosystem, valued at $40 billion, suffered a collapse in May 2022 when its algorithmic stablecoin TerraUSD (UST) lost its peg to the U.S. dollar.
Additionally, in their legal proceedings, Kwon and Terraform sought to exclude the testimony of the SEC’s experts, including a report by Rutgers University economics professor Bruce Mizrach, which they criticized as unreliable science. Judge Jed Rakoff, presiding over the case, rejected Terraform’s previous attempt to dismiss the lawsuit. Kwon is presently in detention in Montenegro and has previously requested the court to reject the SEC’s request to extradite and interview him in the United States.