The SEC has Failed to Prove that Do Kwon Defrauded Investors: Lawyers

• The lawyers representing the founder of Terraform Labs, Do Kwon, claim that the SEC has not been able to prove that the entrepreneur defrauded investors. 
• They asked the judge to dismiss the case against the crypto entrepreneur put forth by the regulator because the acquisitions were unfounded. 
• The SEC claims that the creator of the UST stablecoin (now USTC) defrauded investors by selling them unregistered securities. 
• The lawyers argued that the UST (now USTC) stablecoin was a currency and not a security, as the SEC claims.

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The collapse of the Terra ecosystem wiped off more than $60 billion from the total market capitalization of the cryptocurrency market, and the industry is still recovering from the effects of that implosion. However, the person responsible for the collapse of this ecosystem and many investors having to sell their estates to recover from debt, Do Kwon, claims to be innocent. The lawyers representing the crypto entrepreneur stated that the SEC has failed to prove that he defrauded investors. 

According to a report from Bloomberg, the lawyers representing Do Kwon said on April 21 that the United States Securities and Exchange Commission (SEC) has failed to prove that Terraform Labs’ founder was responsible for conducting a fraud. As a result, the lawyers asked the judge to throw out the lawsuit since it wasn’t based on facts but on sentiments. 

The SEC claims in the lawsuit that Do Kwon misled investors and was responsible for conducting a fraud by offering unregistered securities to crypto investors in the US. However, the lawyers representing the crypto entrepreneur told the judge that the regulator’s acquisitions were unfounded. 

The lawyers asked the judge to dismiss the case while adding that the laws of the United States prohibit the regulator “from using federal securities law to assert jurisdiction over the digital assets in this case.” Moreover, lawyers stated that the SEC has not been able to connect Do Kwon with the collapse of the UST stablecoin while adding that UST (now USTC) is not a security but a currency. 

The court proceedings began after Do Kwon was arrested in the capital of the European country Montenegro, Podgorica, on March 23 with falsified documents. Along with the crypto entrepreneur, his former assistant, Han Mo, was also caught, and the two are awaiting extradition to the US or South Korea. 

It is crucial to note here that South Korea issued a warrant for the arrest of Do Kwon in September 2022. Now, the founder of Terraform Labs is facing around five years in Montenegrin prison if he is found guilty of using forged Costa Rican passports to enter Montenegro. Additionally, prosecutor Haris Šabotić said he would complete the investigation before April 23, and if enough evidence could not be found, Kwon would be relieved of charges.

“In the case when we receive several extradition requests, I would like to say that determining to which state they will be extradited is based on several factors like the severity of the committed criminal offense, the location and time when the criminal offense has been committed, the order in which we have received the request for extradition and several other factors,” said Montenegrin Justice Minister Marko Kovač.

However, it is up to the judge to decide to which country (South Korea or the US) Do Kwon will be extradited. More importantly, according to a lawyer, Montenegrin prisons are small and overcrowded and lack proper medical care, who implied that Do Kwon is in for a hard time if found guilty by the judge. 

Another important fact to mention here is that Do Kwon pre-paid the law firm Kim & Chang over $7 million prior to the collapse of the Terra ecosystem. This implies that the crypto entrepreneur knew about the implosion of Terra beforehand.

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