Do Kwon says SEC’s extradition request is impossible

September 28, 2023 Coin Telegraph

The Terraform Labs co-founder has pushed back against the SEC’s request to question him in the United States.

Lawyers for Terraform Labs co-founder Do Kwon have requested a federal court to reject the United States Securities and Exchange Commission’s (SEC’s) request to question him in the U.S. over the collapse of the Terra Money ecosystem.

In a Sept. 27 filing, Kwon’s legal team said that the SEC’s request to question him in the United States before Oct. 13 was “impossible” due to being detained in Montenegro with “no scheduled release or extradition date.”

Additionally, Kwon’s team said that providing a written testimony to answer the SEC’s questions would be inconsistent with his right to due process under U.S. law.

“An order mandating something that is impossible serves no practical purpose and risks undermining judicial authority.”

*Lawyers for Do Kwon claim that the SEC’s extradition request is impossible. Source: CourtListener*

Notably, Kwon’s lawyers claimed that Kwon did not directly oppose a deposition, however noted that it would need to take place in Montenegro, where the UST stablecoin creator is currently out on bail.

According to the filing, the cut off date for discovery in the SEC’s case against Kwon and Terraform Labs is Oct. 13.

Kwon’s legal team added that a Montenegrin court “informally” indicated that it may yet hold a hearing on Oct. 13 or Oct. 26, in which it would ask Kwon the SEC’s questions. However, the SEC noted that it may deem this process to be “inadequate” and pursue another deposition of Kwon after the discovery cut-off date.

The SEC sued Terraform Labs and Kwon on Feb. 16 for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”

Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.
— U.S. Securities and Exchange Commission (@SECGov) February 16, 2023

In the lawsuit, the SEC said that Terraform and Kwon “touted and marketed” its Anchor Protocol, which at one point was advertised to pay out 20% interest on USTC deposits. It also alleged Terraform and Kwon misled investors about the stability of Terra’s stablecoin.

Kwon and Terraform Labs’ chief financial officer Han Chang-Joon were arrested in Montenegro in March 2023 after allegedly using false travel documents when trying to leave the country. The two had their original passports confiscated in South Korea in October 2022.

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SEC seeks to question Terraform Labs co-founder Daniel Shin in Korea

August 18, 2023 Coin Telegraph

CHAI

The SEC seeks to question Daniel Shin on Do Kwon and Chai Corporation’s relationship with Terraform Labs.

The United States Securities and Exchange Commission has been granted a motion to seek assistance from South Korea to question Terraform Labs co-founder Daniel Shin — as it builds its case against the firm and co-founder Do Kwon.

On Aug. 16, District Judge Jed Rakoff granted the SEC’s July 10 motion asking if it could seek to question the Terra co-founder, along with requesting documents from the Seoul-based payments provider Chai Corporation he founded.

In its July filing the SEC said it wishes to question Shin on Kwon’s role at Chai, how Chai used the Terra blockchain and Chai’s disclosures about its relationship with Terraform.

It also wants to know why Chai separated from Terraform. Chai was founded by Shin and Kwon in mid-2019 and shared offices and staff with Terraform until the two firms split in 2020.

*Excerpt of some of the questions the SEC seeks to ask Shin. Source: CourtListener*

Terraform Labs and Kwon didn’t oppose the SEC’s motion and included their own questions and document requests — they have previously denied the SEC’s allegations.

The SEC sued Terraform and Kwon in February alleging its now-collapsed cryptocurrencies TerraClassicUSD (USTC) and Terra Luna Classic (LUNC) — formerly Terra (LUNA) and TerraUSD (UST) — were fraudulent.

It also alleged Kwon and Terraform falsely touted that Chai used the Terra blockchain to process and settle transactions.

The SEC claimed Terraform and Kwon faked transactions of its Korean won pegged stablecoin TerraKRW (KRT) to give the impression that Chai was using the blockchain.

Terra’s interconnected crypto ecosystem collapsed in May 2022 wiping out around $40 billion in value, bringing the rest of the crypto market with it.

In April, South Korean prosecutors hit Shin with multiple fraud charges alleging he hid the risks of investing in Terraform’s cryptocurrencies.

Kwon is currently in Montenegro serving a four-month prison stint for trying to leave the country using a fake Costa Rican passport.

Along with the SEC’s suit, Kwon also faces criminal charges in the U.S. and South Korea — both countries have requested his extradition.

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SEC hints at potential appeal to XRP ruling from Ripple Labs lawsuit

July 22, 2023 Coin Telegraph

Coin Telegraph

According to court documents, the SEC stated that it is now “considering the various available avenues for further review” on the ruling which found XRP to not be a security.

The U.S. Securities and Exchange Commission has suggested that it may appeal a recent ruling on the Ripple Labs lawsuit, which deemed XRP to not be a security when sold to retail investors.

The SEC argues that the ruling goes against “fundamental securities laws principles” such as the Howey Test, which determines what falls under the category of an investment contract or not.

Do we really want a judge to ask herself: Does my strict application of the Howey test in this case result in an outcome in 2023 that comports with the policy implications behind a 1934 statute? https://t.co/acMNRc00B6
— John E Deaton (@JohnEDeaton1) July 22, 2023

The SEC’s latest comments on the Ripple Labs lawsuit were made in a separate lawsuit against Terraform Labs and its founder Do Kwon, over allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”

As per the SEC’s July 21 response to a motion to dismiss from Terraform Labs — in which the potentially precedent-setting Ripple Labs ruling was referenced by the defendants — the SEC highlighted a host of issues it holds against the court’s recent decision on XRP.

“Contrary to Defendants’ assertions, much of the Ripple ruling supports the SEC’s claims in this case and rejects arguments Defendants have raised here. However, with respect to the Programmatic and other sales, the SEC respectfully avers that Ripple conflicts with and adds baseless requirements to Howey and its progeny,” the SEC stated, adding that:

“Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them. SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.”

The SEC’s statements come just a few days after SEC Chair Gary Gensler expressed his disappointment over the court deeming XRP to not be a security when sold to retail investors.

“We are pleased that the court addressed […] that a token for institutional investors is a security […] disappointed in the other aspect about retail investors. We are still taking a look at that and considering it,” Gensler stated in a July 17 interview with Yahoo Finance.

On the same day, Gensler also appeared at the National Press Club to give a talk on artificial intelligence, and was questioned if the court rulings represented an urgent need to establish clear regulation for the industry.

Gensler however, failed to provide a specific answer to such.

The SEC arguing that a court didn’t follow Howey is rich… On its own website, the SEC has acknowledged that Fed courts require commonality & then it goes on to say that it doesn’t require commonality in its analysis or view commonality as a distinct part of Howey. If the SEC’s… https://t.co/CX6Kwfh3cJ
— exlawyer.eth/tez (@exlawyernft) July 22, 2023

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