Do Kwon, co-founder of Terraform Labs, has moved to dismiss a securities and fraud lawsuit filed by federal securities regulators, asserting that they failed to provide evidence of wrongdoing. Legal documents submitted in New York District Court on October 27 by Kwon and Terraform's lawyers argued that their cryptocurrencies, including Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and their mirror assets (mAssets), do not qualify as securities, as alleged by the SEC.
The attorneys stated, "After two years of investigation, more than 20 depositions, and the exchange of over 2 million pages of documents and data, it is evident that the SEC is no closer to proving that the defendants did anything wrong." They further contended that the SEC's claims lacked substantial supporting evidence and even alleged that the regulators knew some of their accusations were false, such as the claim that Kwon and Terraform secretly transferred millions of dollars to Swiss bank accounts for personal gain.
In the SEC's lawsuit filed in February, it accused Kwon and Terraform of transferring 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrawing $100 million, while also alleging that they engaged in fraud by making "repeated false and misleading statements."
Kwon's legal team noted that "The SEC knew this allegation was false when it filed this case," and highlighted the lack of customer funds due to the absence of customers within Terraform's system. The Terra ecosystem, valued at $40 billion, collapsed in May 2022 when its USTC algorithmic stablecoin lost its peg to the U.S. dollar. Despite these arguments, the SEC's experts' reports, including one from Rutgers University economics professor Bruce Mizrach, were labeled "junk science" by Kwon and Terraform.
Previously, Terraform's attempt to have the lawsuit dismissed was denied by the presiding judge, Jed Rakoff. Kwon, currently detained in Montenegro, had also sought to prevent extradition to the United States and requested an interview in Montenegro rather than the U.S. in response to the SEC's motion.
