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Do Kwon, the disgraced founder of the Terraform ecosystem, along with Terraform Labs, have asked a federal judge for a summary judgment in the SEC’s fraud case against them.
Do Kwon and Terraform Labs filed a motion for a summary judgment asking Judge Jed Rakoff to toss the US Securities and Exchange Commission’s case against them.
In the motion, lawyers for Mr Kwon and Terraform Labs argued Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and its Mirrored Assets (mAssets) are not securities as the SEC alleges and asks the judge to reject the securities and fraud suit.
A motion for summary judgment is a formal request to Judge Rakoff of the US District Court for the Southern District of New York that he rule the SEC has not sufficiently defended its case to justify a trial.
Terraform Says SEC Failed to Prove Unregistered Securities Were Offered
The securities fraud case brought by the SEC has reached pre-trial, and the company has asked the court to rule in its favour. Terraform Labs argues that the securities regulator failed to prove that the company offered unregistered securities.
In its motion, Terraform contends:
“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.”
Terra’s lawyers further said “evidence does not exist to support many of the SEC’s claims”, stating the SEC “knew some of its allegations were false.”
The SEC filed a lawsuit against Terraform and Kwon, alleging that US investors were defrauded. At the time, Kwon’s lawyers asked the judge to toss the SEC’s case by arguing that the agency had exceeded its authority by failing to prove its allegations. In February, the SEC sued Kwon and Terraform, claiming they sent 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrew $100 million.
SEC Chair Gary Gensler commented on the February suit, saying:
“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD.
We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
“I commend the SEC’s hard-working staff who remained vigilant in such an important investigation, even when the defendants attempted to prevent us from obtaining important information about their business.
This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants.”
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