The SEC is pressing a federal judge for a quick ruling without a full trial, arguing there’s no real disagreement about the key facts in their lawsuit against Do Kwon and Terraform Labs.
According to the SEC’s legal papers, it’s clear that investors put money into the venture, using either traditional currency or cryptocurrencies. The SEC’s documents revisit their stance that Kwon and Terraform essentially dealt in unregistered securities.
The crux of the SEC’s argument is that the situation meets the criteria of the Howey test—investors’ money was put into a common venture with profits expected mainly from the work of the project’s creators—thus, they believe the court should rule in their favor.
Moreover, the SEC claims Terraform and Kwon weren’t just selling unregistered securities; they were also actively deceiving investors. The filing underscores their point that Kwon and his company committed fraud. They supposedly lied about the stability of their digital currency, UST, credited a supposedly robust algorithm for maintaining its price, while in reality, they were covertly relying on third-party interventions. When Terra imploded last May, it wiped out billions in investor funds.
This development follows shortly after Kwon’s legal team lodged their own request for a favorable judgment, contending that the SEC has failed to demonstrate that Terraform was in the business of selling securities.
Meanwhile, Kwon is currently in Montenegro paying a sentence for forging documents, having been apprehended at an airport with fake passports.
In a related note, Daniel Shin, the co-founder of Terraform who is facing trial in South Korea, blamed the company’s downfall on Kwon’s poor leadership. Shin has stressed that he had cut ties with the company and its operations two years before it went under.