Do Kwon and Terraform Labs Submit Motion for Case Dismissal against U.S. SEC

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Hongji Feng

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Hongji Feng

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Hongji is a crypto and tech reporter. He graduated from Northwestern University's Medill School of Journalism with a Bachelor's and a Master's. He has previously interned at HTX (Huobi Global),...

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October 30, 2023

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Terraform Labs and co-founder Do Kwon have filed a motion for summary judgment against the U.S. Securities and Exchange Commission (SEC), seeking to dismiss allegations of multi-billion-dollar securities fraud. This move could prevent a lengthy trial if the judge rules in Terraform’s favor.

In the motion, Terraform Labs and Do Kwon assert that the SEC has failed to provide ample evidence for their claims. They stated, “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.”

Terraform Labs directed their motion for summary judgment to Jed Rakoff, the judge at the U.S. District Court for the Southern District of New York, aiming for a swift resolution. However, Terraform’s last attempt did not land well as Rakoff dismissed Terraform’s previous motion to have the lawsuit thrown out, siding with the SEC’s argument that there might be a “plausible claim” regarding Terraform’s potential violation of securities law. Rakoff also rejected using a recent ruling as a precedent which determined that Ripple Labs did not violate any securities law.

The fallout from a $40 billion loss in 2022 placed Terraform in the vanguard of crypto firms facing adversities, now clashing with the SEC over pivotal industry concerns. Post the collapses of its TerraUSD (UST) and LUNA, the SEC sued Terraform Labs and Do Kwon, alleging that both the Anchor Protocol and the LUNA token are “crypto asset securities,” thus Terraform was selling unregistered securities and security-based swap and violated respective regulations.

Kwon is now detained in Montenegro while the U.S. and South Korea have requested his extradition. Kwon’s lawyers urged the court to reject such requests to extradite Kwon to the U.S. Meanwhile, Terraform Labs co-founder Daniel Shin is confronting his own set of fraud charges in South Korea.

The SEC declined to comment on Terraform’s summary judgement request.