Do Kwon, co-founder of the now-defunct Terraform Labs, has petitioned a U.S. district judge to dismiss the fraud and securities lawsuit filed against him and his company by the Securities and Exchange Commission (SEC).
Kwon and Terraform Labs argue that the SEC has failed to substantiate their accusations following a lengthy investigation and discovery phase. The attorney team for the defendants asserted that their cryptocurrencies, including Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and Mirrored Assets (mAssets), are not securities as claimed by SEC.
The lawyers further stated that the evidence to back many of the SEC’s allegations does not exist. They specifically pointed to the regulator’s claim that Kwon and Terraform surreptitiously transferred large sums into Swiss bank accounts for personal gain. This allegation, according to the defense, was known by the SEC to be false.
The SEC lawsuit against Kwon and Terraform, filed in February, alleged that the pair had sent 10,000 Bitcoin (BTC) to a Swiss institution and withdrawn $100 million. They were also accused of making false and misleading statements. The defense team refuted these claims, stating that Terraform Labs had no customers, and thus no customer funds.
The Terra ecosystem, valued at $40 billion, collapsed in May 2022 after its USTC algorithmic stablecoin lost its U.S. dollar peg. Kwon, currently under detention in Montenegro, had previously requested the court to reject the SEC’s motion for his extradition and interview in the U.S. Judge Jed Rakoff who is overseeing the case had earlier denied Terraform’s attempt to dismiss the lawsuit.
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