SEC and Terraform Labs Clash in Court Over Whistleblower Evidence

In a recent court session, lawyers representing the United States Securities and Exchange Commission (SEC) and Terraform Labs, along with co-founder Do Kwon, engaged in a contentious exchange over information provided by a whistleblower in an ongoing securities lawsuit.

The SEC reiterated its allegations that Terra and Kwon had “committed fraud” using the LUNA token, referencing sealed evidence presented by an anonymous whistleblower. The regulatory body maintained its stance, emphasizing fraudulent activities related to the LUNA token.

Kwon’s and Terra’s legal team countered the SEC’s claims, accusing the regulatory body of inconsistency regarding TerraUSD (UST) depegging from the U.S. dollar. They argued that the SEC was “flip-flopping” on this issue. Kwon’s lawyer stated, “The SEC has misrepresented Do Kwon’s statements,” and highlighted that the whistleblower had not disclosed some of the recordings.

U.S. District Court for the Southern District of New York Judge Jed Rakoff, expressed concerns about the said confidentiality. The judge suggested that confidentiality of filings would make no sense under seal if the case goes on trial. 

The court session followed the judge’s recent approval of the confidential treatment of certain materials filed by Jump Crypto, a firm under scrutiny for its alleged involvement in events leading to the depegging of UST.

As the legal battle unfolds, the clash between the SEC and Terraform Labs intensifies, with arguments centering on alleged fraud and the handling of confidential materials, setting the stage for a complex and closely watched legal confrontation.

Class-Action Lawsuit Against Terraform Labs in Singapore 

Terraform Labs, along with founder Do Kwon, faces the prospect of a class-action lawsuit in Singapore after the High Court dismissed attempts to have the case dismissed, as reported by Business Times. The development unfolds amid legal challenges for Terraform Labs, including a separate case with the United States Securities and Exchange Commission (SEC).

In response to the lawsuit filed in September 2022 by Julian Moreno Beltran and Douglas Gan on behalf of 375 others, Terraform Labs sought to shift the action to an arbitration process, invoking the website’s terms of use. The company’s legal team argued that users had waived their right to trial and participated in a class-action suit. However, the High Court ruled against this attempt to divert the case.

The class-action lawsuit alleges fraudulent misrepresentation by Terraform Labs, Do Kwon, and co-founders in their promotion of the algorithmic stablecoin TerraUSD (UST). The claimants, totaling 377 individuals, assert losses amounting to a combined $57 Million. 

The crux of their claim revolves around the promotion, purchase, and staking of TerraUSD tokens, which lost their peg to the U.S. dollar in May 2022, subsequently plummeting to less than $0.10.

Do Kwon, who faced legal complications earlier with an arrest in Montenegro for using falsified travel documents, is now confronted with potential extradition to either the U.S. or South Korea. This follows court approval of the extradition proceedings. In addition to the SEC civil case, the U.S. Attorney’s Office has charged Kwon with eight criminal counts related to fraud at Terraform Labs.

As the legal landscape intensifies for Terraform Labs and Do Kwon, the Singapore High Court’s decision to allow the class-action lawsuit to proceed adds another layer of complexity to the ongoing legal challenges faced by the blockchain company and its founder.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages ​​and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.