Terraform Labs co-founder Do Kwon challenges SEC fraud allegations, seeking lawsuit dismissal amid ongoing extradition uncertainty.
Attorneys representing Terraform Labs co-founder Do Kwon have presented a strong case in court to refute the allegations made by the United States Securities and Exchange Commission (SEC). The SEC alleges that Kwon deceived U.S. investors by illegally offering unregistered securities. A Bloomberg report on April 21 revealed that Kwon’s attorneys requested the judge to dismiss the SEC lawsuit, stating that the regulator’s claims lack merit. They emphasized that U.S. law does not allow regulators to use federal securities law to assert jurisdiction over the digital assets in question.
Furthermore, Kwon’s legal representatives asserted that the SEC could not demonstrate that their client had defrauded U.S. investors in relation to the $40 billion collapse of Terra’s TerraUSD (UST) and LUNA. They contend that the UST stablecoin is a form of currency, not a security, and therefore should not fall under securities regulations.
Arrest and Extradition Uncertainty
The legal proceedings began when authorities arrested Do Kwon at the Podgorica airport in Montenegro on March 23. He was reportedly attempting to travel to Dubai using falsified documents. Following his arrest, law enforcement agencies from South Korea and the United States sought Kwon’s extradition. At this time, it is unclear which country, if any, will have their extradition request granted.
On March 29, Montenegrin Justice Minister Marko Kovač, speaking through an interpreter, provided some insight into the factors that determine extradition decisions when multiple requests are received. These factors include the severity of the alleged criminal offense, the location and time of the offense, the order in which the extradition requests were received, and other relevant considerations.
Seoul Court Denies Arrest Warrant for Do Kwon
In a related development, the Seoul Southern District Court recently declined to issue an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong. Prosecutors had hoped to capitalize on Kwon’s arrest to apprehend Shin. However, the court denied the request, pointing out that the allegations are unverified and that Shin is unlikely to pose a flight risk or destroy evidence.
As the legal battle progresses, the outcome of the case against Do Kwon and the future of Terraform Labs hang in the balance. The court’s decision on whether to dismiss or proceed with the SEC’s lawsuit will have far-reaching implications for the regulation of digital assets in the United States, potentially establishing a precedent for future cases involving cryptocurrencies and blockchain technology.
In other news, reports suggest that authorities found a hardware wallet inside Do Kwon’s body. If the rumors are true, then that wallet could contain the millions that went missing post the Terra fiasco.