Legal teams representing Terraform Labs and Do Kwon have taken steps to bolster their defense in the ongoing lawsuit brought against them by the U.S. Securities and Exchange Commission (SEC). Their move comes in the wake of mounting allegations of SEC misconduct in a related regulatory lawsuit, raising questions about the regulator’s actions in both cases.
Allegations of SEC misconduct
In a recent filing, attorneys for Terraform Labs and Do Kwon brought to the attention of Judge Rakoff the SEC’s conduct in a separate lawsuit involving Debt Box/Digital Licensing. The SEC has faced criticism for its handling of the Debt Box case, with Judge Robert J. Shelby hinting at potential fines against the regulatory body due to deceptive statements made in its action against the crypto firm. The defense argues that this information is crucial as it casts doubt on the SEC’s credibility in using excerpts of evidence in their case.
Previously, the legal teams for Terraform Labs and Do Kwon accused the SEC of making misleading statements about the company’s founder, Do Kwon. Court transcripts provided by Inner City Press reveal these allegations. Furthermore, the SEC has faced scrutiny from the cryptocurrency community for its approach to cases involving blockchain and cryptocurrency firms, adding to the complexity of the ongoing legal battle.
The TerraLuna depeg and allegations of fraud
The core of the SEC’s case against Terraform Labs and Do Kwon revolves around the TerraLuna depeg incident, which had a significant impact on the cryptocurrency market, wiping out billions of dollars in value and triggering an extended bear market. The SEC alleges that Do Kwon committed fraud using the LUNA token, allegations that the defense vehemently denies.
Extradition proceedings
In a separate development, the extradition of Do Kwon to either the United States or his home country, South Korea, has received approval from Montenegro officials, where he is currently imprisoned. Both U.S. and South Korean regulatory authorities have sought Do Kwon’s extradition. However, it is important to note that the extradition process can only proceed after he serves his sentence in Montenegro.
In light of these recent developments, the legal battle between Terraform Labs, Do Kwon, and the SEC continues to gain complexity and attention.
The allegations of SEC misconduct in the Debt Box/Digital Licensing case raise concerns about the regulator’s actions and credibility. Judge Shelby’s indication of potential fines against the SEC underscores the seriousness of the situation. The defense’s argument that this misconduct may extend to their own case against Terraform Labs and Do Kwon could significantly impact the outcome of the lawsuit.
The ongoing legal battle between Terraform Labs and Do Kwon on one side and the SEC on the other has far-reaching implications for the cryptocurrency industry. The allegations of fraud and misleading statements, coupled with the SEC’s questionable conduct, create a complex web of legal issues that will need to be carefully examined and resolved by the court.
The approval of Do Kwon’s extradition to the United States or South Korea is a significant development in the case. It indicates the willingness of Montenegro officials to cooperate with the regulatory authorities seeking his extradition. However, it is important to note that Do Kwon will only be extradited after serving his sentence in Montenegro, adding a layer of complexity to his legal situation.
