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Do Kwon, the recently arrested CEO of Terraform Labs, denies that he defrauded investors, and says that SEC allegations are unfounded.
Do Kwon is denying SEC allegations that he defrauded his investors by selling Terra, his blockchain platform. Kwon was recently arrested by US authorities in Montenegro, as he and a colleague were attempting to board a plane to Dubai with false travel documents, and is currently being held without bail.
SEC improperly using its power
According to the Wall Street Journal, Do Kwon’s lawyers have asked for the judge to throw out the SEC’s lawsuit on the grounds that it had exceeded its authority by failing to prove that US investors had been defrauded.
Taken from what Do Kwon’s lawyers have so far said, it would appear that the defence will mainly be based on what the lawyers are saying is a failure by the SEC and the executive branch to agree on exactly what constitutes a security as regards cryptocurrency.
The filing by the lawyers asserts:
“The SEC’s improper assertion of power here by trying to shoehorn all cryptocurrencies into its definition of a ‘security’ fails,”
Fraudulent securities offering
Terra is a platform for creating stablecoins, which are cryptocurrencies pegged to stable assets, like the US dollar. The SEC claims that Kwon, Terraform Labs, and Terraform, raised $25 million through a fraudulent security offering. It is alleged that investors were told that they would get a return from Terra's stablecoin UST.
Kwon is a Korean national and has been detained in an American detention facility since his arrest. His legal team claims that Kwon is not a flight threat and should be freed on bail. US authorities, however, argue that Kwon is a flight threat and could possibly flee. Both the US and South Korea are seeking extradition.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.