Terraform Labs and its co-founder, Do Kwon, are asking a federal judge to side with them in the U.S. Securities and Exchange Commission (SEC) fraud case, arguing that the regulator hasn’t managed to prove the crypto company was offering securities.
“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 contended in its motion for summary judgment – a formal request to Judge Jed Rakoff of the U.S. District Court for the Southern District of New York that he decide the SEC hasn’t sufficiently demonstrated its case to justify a trial.
The $40 billion disaster at stablecoin issuer Terraform in 2022 marked a big first domino in a series of prominent crypto firms going under, and the company is now one of several crypto businesses currently fighting with the agency over core questions underpinning the digital assets industry. After the company’s TerraUSD stablecoin (UST) and its Luna cryptocurrency collapsed, it faced SEC accusations that the company and Kwon sold unregistered securities in a massive fraud that cost investors billions.
The firm is also asking the court to toss out the views of experts the SEC enlisted to make its case, including the “conceptually flawed” analysis of a Rutgers University professor.
An earlier attempt to get the case dismissed outright was rejected by the court, with Rakoff noting the SEC made a “plausible claim” that Terraform had offered investment contracts, meaning the case would correctly have been within the reach of the agency’s securities enforcement jurisdiction.
Spokespeople for the SEC didn’t immediately respond to a request for comment on the latest filings.
Kwon has asked the same court to reject the SEC’s request to question him in the U.S. about the catastrophic crash of his company’s tokens. Kwon’s lawyers are opposing any opportunity for the stablecoin creator to offer testimony, arguing that it would be “impossible” to bring Kwon to the U.S. because he remains detained in Montenegro. Both South Korean and U.S. authorities have requested his extradition.
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