The U.S. Securities and Exchange Commission Files Motion for Summary Judgment Against Terraform Labs and Its Founder

The U.S. Securities and Exchange Commission (SEC) has filed a motion for summary judgment in its case against Terraform Labs and its founder, Do Kwon. The motion, filed in the Southern District of New York, states that there is clear and overwhelming evidence that establishes the defendants’ violations. The SEC sees no need for a lengthy trial.

Summary judgments are authorized in the U.S. when there is no genuine dispute to any material fact. In this case, the SEC argues that “No rational jury could conclude that Kwon was not liable for Terraform’s violations of the Exchange Act.”

The Allegations Against Terraform Labs and Do Kwon

Do Kwon was the co-founder of Terraform Labs, the company behind the Terra blockchain ecosystem. The company experienced a significant downfall when its algorithmic stablecoin UST de-pegged in May 2022, leading to the collapse of its sister token, LUNA. This event wiped out over $40 billion and caused bankruptcies and turmoil in the industry.

The SEC accuses Kwon and his firm of offering and selling unregistered securities in LUNA, UST, and the Mirror token (MIR). The regulator also alleges that the defendants made false and misleading statements on various platforms, including Medium, Discord, Twitter, and public interviews.

One of the false statements involved claiming that the Chai payments app on the Terra network was processing millions of transactions, which was not true. Leaked messages between Chai co-founder Daniel Chin and Kwon revealed that Kwon admitted to creating fake transactions to deceive investors. When asked if their actions could be discovered, Kwon responded, “I won’t tell if you won’t.”

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Summary Judgment Requested by SEC, Dismissal Motion Filed by Do Kwon

The SEC’s Enforcement Division’s trial counsel, Devon Staren, concluded that summary judgment is warranted against Terraform Labs and Kwon on all of the SEC’s claims.

On the same day, Do Kwon filed a motion requesting the dismissal of the lawsuit against him. He claimed that the SEC had failed to provide evidence of his guilt after a two-year investigation.

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By Team