Do Kwon, Terraform Labs' co-founder, is expected to be extradited from Montenegro back to the United States to face multiple charges of criminal offenses related to Terraform Labs' collapse and other crimes. Terraform Labs is requesting that a jury decide the status of their tokens which have been labeled securities by the U.S. Securities and Exchange Commission. The legal battle continues but the SEC has been accused of serious misconduct.
Do Kwon to be Extradited To the U.S.
Do Kwon, Terraform Labs' co-founder, will reportedly face extradition to the United States rather than South Korea in order to answer a number of criminal charges relating to the collapse Terraform Labs. This is because Justice Minister Andrej Milovic of Montenegro plans to grant an extradition request from U.S. officials. Kwon was sentenced to 4 months in jail for falsifying travel documents in Montenegro and arrested there in March. He now faces even more trouble in America, where he has been charged with 8 counts including commodities fraud and securities fraud. The SEC is also stepping in to make things worse. In February, the regulator charged Kwon for "defrauding crypto scheme investors".
The collapse of Terraform Labs, in May 2022, was a pivotal event that led to a massive downturn on the cryptocurrency market. During this time, TerraUSD (UST), which was pegged to the U.S. Dollar, depreciated, causing a wave financial instability. Terraform Labs collapse forced several well-known firms to declare bankruptcy, including Voyager Digital BlockFi Celsius Network and FTX.
Do Kwon was in the shadows before his arrest in Montenegro. Many speculated that Terraform Labs' co-founder Do Kwon was in Singapore. Legal experts do not rule out the possibility that Kwon could face additional charges in South Korea, even though it seems as if he will be facing U.S. officials first. Kwon, however, has always denied being involved in any fraudulent activities.
Andrej Milovic, the Justice Minister, has stated that an official announcement will be made "in a timely fashion" regarding Kwon’s extradition.
Let the jury decide...
Terraform Labs - the company that created the Terra stablecoin and cryptocurrency LUNA - has asked a New York court to allow a jury determine the regulatory status for the tokens. The SEC, on the other hand, wants the judge to decide this.
In February, the SEC filed a suit against Terraform Labs, Do Kwon, and other companies, alleging they had raised substantial funds through "the offering and selling of a suite of interconnected crypto asset securities. Many of these transactions were unregistered."
David Kornblau's letter to Judge Jed Rakoff argued that a jury should decide whether or not "the SEC has proven its burden" that UST tokens, LUNA tokens, wLUNA tokens, and MIR are securities. The SEC had previously argued against the request, stating that it was very rare for juries to decide whether or not something is an investment contract.
Numerous legal battles have been fought between the SEC, and crypto firms over the classification of cryptocurrencies as securities. If a token is deemed to be an investment contract by the SEC, it must register and disclose specific information to investors.
Terraform Labs requested that the judge grant a summary judgement in favor of defendants, rather than proceeding with a full-blown trial. Terraform Labs has requested that if the judge doesn't grant a summary judgement, the matter is presented to a juror.
The company cited the precedent established by the 2021 Audet vs. Fraiser case, in which a jury found that four crypto assets weren't securities. The SEC responded by stating that it was the first time a jury had been asked to determine whether or not something was an investment contract. The SEC also insists that Terraform Labs' involvement in the sale securities is beyond doubt.
Terraform Labs may fight back
Terraform Labs claims that the SEC misled the court regarding digital licensing for the trading platform in the DEBT Box Case. This accusation follows arguments between November 17 and Nov. 30 in which the SEC is alleged to misrepresent evidence.
On the fifth day of trial, Judge Jed Rakoff banned legal experts who represented Terraform Labs. This certainly raised eyebrows, and increased suspicions about the SEC's behavior in this case. The SEC's actions in the DEBT Box matter have been criticized before. The regulatory body was criticized for convincing the court to issue a temporary restraining orders against the crypto company. According to reports, the SEC used false evidence as part of its tactics.
The SEC claimed that DEBT Box attempted to transfer its assets and investor funds abroad. In August, the court issued a restraining orders against the company. But subsequent investigations showed that these allegations were false.
In response to the revelations made by Judge Robert Shelby, he has asked the SEC to provide legitimate reasons for their deceptive acts, and warned of possible sanctions if it fails to do so.
