The United States Securities and Exchange Commission (SEC) has been embroiled in a court battle with Terraform Labs and its co-founder, Do Kwon. The case has seen legal representatives from both sides wrangling over crucial information obtained from a whistleblower. The SEC alleges that fraudulent activities were conducted using Terraform’s LUNA token, based on sealed evidence from this anonymous source. But Terraform and Kwon’s defense team have countered these charges, claiming the SEC misinterpreted the issues around TerraUSD (UST) de-coupling from the U.S. dollar.
Terraform and Kwon’s lawyers criticized the SEC for its allegedly inconsistent approach to the UST depegging issue. They also argued that the anonymous whistleblower, whose identity remains undisclosed, concealed part of his recorded materials.
The case, ongoing in the U.S. District Court for the Southern District of New York, has seen Judge Jed Rakoff suggesting that all sealed documents may become public should the case be proceeded to trial. Additionally, on November 28, the court permitted the confidential treatment of some materials filed by Jump Crypto, which is also under investigation for its potential role in the UST depegging issue.
Do Kwon, who was detained by Montenegro authorities in March for using counterfeit travel documentation, may face extradition to either the U.S. or South Korea depending on the outcome of the court. Aside from the SEC’s civil lawsuit, Kwon is fending off criminal charges from the U.S. Attorney’s Office related to eight charges of fraud at Terraform Labs.
Judge Rakoff intends to proceed with the SEC case against Terra and Kwon if motions for summary judgment are dismissed. The trial is expected to begin in January 2024. In related news, sentencing for the former FTX CEO, Sam Bankman-Fried, is due in March 2024. Additionally, a trial for Alex Mashinsky, the former CEO of Celsius, is set for September 2024 in the same district court.