Kwon’s lawyers argued that U.S. law does not allow regulators to assert jurisdiction over digital assets and that the SEC failed to provide evidence of fraud in connection with the collapse of Terra’s TerraUSD and LUNA.
The legal battle surrounding Terraform Labs co-founder Do Kwon and the allegations brought forth by the United States Securities and Exchange Commission (SEC) has taken a new turn, as Kwon’s lawyers have reportedly dismissed the SEC’s securities fraud allegation in court. In a recent hearing, Kwon’s legal team argued against the accusations, stating that the regulator’s claims were unfounded and lacked evidence, as reported by Bloomberg.
Kwon’s lawyers went on to assert that U.S. law does not allow regulators to assert jurisdiction over digital assets in this case, citing that federal securities law should not apply. They further claimed that the SEC failed to provide proof that Kwon had defrauded U.S. investors in connection with the collapse of Terra’s TerraUSD (UST) and LUNA, which amounted to a staggering $40 billion. According to Kwon’s legal team, UST is a currency, not a security.
The legal proceedings against Kwon began after his arrest at the Podgorica airport in Montenegro on March 23, where he was allegedly attempting to fly to Dubai using fake documents. Both South Korean and American authorities have requested Kwon’s extradition, but it remains uncertain which country, if any, will be granted their request.
The complexity of the case is evident as Montenegrin Justice Minister Marko Kovač stated on March 29 that determining the extradition destination is based on various factors, including the severity of the criminal offense, the location and time of the offense, and the order in which the extradition requests were received.
In a related development, the Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong. Prosecutors had hoped that Kwon’s arrest would provide an opportunity to implicate Shin as well, but the court denied the request, citing the unconfirmed nature of the allegations and the unlikeliness of Shin being a flight risk or destroying evidence.
As the legal battle continues, the outcome remains uncertain, and stakeholders closely watch the developments surrounding the allegations against Do Kwon and Terraform Labs. The lengthy legal process is expected to unveil more details in due course, shedding light on the complex and evolving nature of the case.