Collapsed crypto company Terraform Labs has filed for Chapter 11 bankruptcy in the United States. The firm submitted a voluntary petition to the U.S. Bankruptcy Court for the District of Delaware. The document, which was filed on Sunday, indicates Terraform Labs has between 100-199 creditors, owns between $100,000,001-$500 million in estimated assets, and owes between […]
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A US judge has ruled that collapsed crypto company Terraform Labs and its founder Do Kwon offered and sold two digital assets as unregistered securities. The U.S. Securities and Exchange Commission (SEC) and Terraform Labs both requested summary judgment in an ongoing fraud case. The SEC alleges the company and Kwon facilitated a multi-billion dollar […]
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Do Kwon, the co-founder now-collapsed Terraform ecosystem maintains he and his firm did not skirt U.S. securities laws.
Terraform Labs co-founder Do Kwon has requested a United States district judge to reject the securities and fraud suit from the federal securities regulator, claiming it has failed to prove they did anything wrong.
In an Oct. 27 filing to a New York District Court, lawyers for Kwon and Terraform argued its cryptocurrencies Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and its Mirrored Assets (mAssets) that reflect stocks on-chain are not securities as the Securities and Exchange Commission alleged.
“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,” the lawyers wrote.
They added the “evidence does not exist to support many of the SEC’s claims” and asserted the regulator “knew some of its allegations were false” — in particular, an allegation that Kwon and Terraform secretly moved millions into Swiss bank accounts for their own gain.
In its suit against Kwon and Terraform filed in February, the SEC claimed the pair sent 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrew $100 million. It also claimed they committed fraud by “repeating false and misleading statements.”
“The SEC knew this allegation was false when it filed this case,” Kwon’s lawyers wrote. ”This is made even worse by the undisputed fact that TFL had no customers, and thus no customer funds.”
The $40 billion Terra ecosystem collapsed in May 2022 after its USTC algorithmic stablecoin lost its U.S. dollar peg.
Related: Terraform co-founder Shin blames protocol for collapse during trial in S. Korea
Kwon and Terraform also moved to exclude the opinion of the SEC’s experts including a report from Rutgers University economics professor Bruce Mizrach which they called “junk science.”
Judge Jed Rakoff, who oversees the case, denied Terraform’s earlier attempt to toss the lawsuit.
Kwon is currently detained in Montenegro and has previously asked the court to reject the SEC’s motion to extradite and interview him in the U.S.
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Terraform Labs has urged the judge to grant its motion to compel trading data from Citadel Securities, which it says had a hand in the collapse of USTC in May 2022.
Do Kwon-founded Terraform Labs has again pointed the finger at market maker Citadel Securities for its role in an alleged “concerted, intentional effort” to cause the depeg of its stablecoin in 2022.
On Oct. 10, Terraform Labs filed a motion in the United States District Court in the Southern District of Florida to compel Citadel Securities LLC to produce documents relating to its trading actions in May 2022, around the time its stablecoin, now known as TerraUSD Classic (USTC), depegged.
It contends the May 2022 depeg, when the asset crashed from $1 to $0.02, was caused by "certain third-party market participants” intentionally shorting the stablecoin, as opposed to instability in its algorithm.
“Movant [Terraform] contends that the market destabilization that occurred did not result from instability in the algorithm underlying the UST stablecoin,” said the firm in its motion.
“Instead, Movant contends that the market was destabilized due to the concerted, intentional effort of certain third party market participants to “short” and cause UST to depeg from its one dollar price.”
The motion also cites “publicly available evidence” suggesting that Citadel head Ken Griffin intended to short the stablecoin around the time of the depeg.
“There is publicly available evidence suggesting that the head of the Citadel Entities, Ken Griffin, intended to short UST at or about the time of the May 2022 depeg.”
The filing cited a screenshot from a Discord channel chat in which a pseudonymous trader had lunch with Griffin, who allegedly said “They were going to Soros the f*** out of Luna UST,” presumably in reference to George Soros' trading strategies — centered around highly leveraged, one-way bets.
Citadel Securities has however previously denied trading the TerraUSD stablecoin in May 2022, according to Forbes.
Cointelegraph contacted Citadel for additional comment but did not receive an immediate response.
Related: Do Kwon says SEC’s extradition request is impossible
In its motion, Terraform argues that the documents are crucial for its defense in the lawsuit filed by the U.S. Securities and Exchange Commission in February, which alleges Terraform Labs and its founder, Do Kwon, had a hand in “orchestrating a multi-billion dollar crypto asset securities fraud.”
“This defense will be substantially impaired if Citadel Securities is successful in withholding this limited information,” it stated.
If the court refuses to compel Citadel to produce the trading documents, Terraform requested the matter be transferred to the U.S. District Court for the Southern District of New York for decision by Judge Rakoff.
In July, Terraform Labs sought permission from a judge to subpoena data from bankrupt crypto exchange FTX, also claiming the information could help its defense.
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Terraform founder Do Kwon will be released from jail but placed under police surveillance at a local residence, a Montenegrin court has decided. The trial against him and another Korean, on charges of travelling on false documents, opened on Thursday with both pleading not guilty. Court Grants Bail Request for Do Kwon, Puts Him Under […]
Prosecutors investigating failed blockchain firm Terraform Labs have found out that its Singapore office sent millions of U.S. dollars to lawyers just before the crash of its cryptocurrencies. According to Korean media, the transfers suggest that co-founder Do Kwon was aware of the imminent collapse. Terraform Labs Transferred Large Amounts of Money to South Korean […]
South Korean authorities have confiscated assets worth millions of dollars from the employees of the blockchain firm Terraform Labs, according to a report. The report by KBS News says that prosecutors in Seoul have seized real estate and other assets worth approximately $160 million from eight employees of the blockchain firm behind the collapsed Terra […]
The post About $160,000,000 in Real Estate and Other Assets Seized From Terraform Labs Employees by Authorities: Report appeared first on The Daily Hodl.
Authorities in South Korea have reportedly seized assets worth billions of won belonging to former representatives of Terraform Labs. The measure should prevent suspects in the case with the failed blockchain firm from selling property that may have been obtained with criminal proceeds. South Korean Law Enforcement Moves to Seize Terraform-Linked Real Estate, Report Prosecutors […]
A court in South Korea has again denied the arrest warrant for Daniel Shin, a co-founder of Terraform Labs who is being investigated for fraud. Shin has been accused of illegally profiting from the sale of over $100 million worth of the luna cryptocurrency before it collapsed. Seoul Court Leaves Terraform Co-Founder at Large Citing […]
Before extradition, Terraform Labs founder Do Kwon will first have to stand trial in Montenegro for traveling on a fake passport, according to his lawyer in the country. The fugitive crypto entrepreneur may also have to serve time in prison before he is extradited from the Balkan nation, its justice minister indicated. Alleged South Korean […]