Recently, Terraform Labs and co-founder Do Kwon filed a federal court petition, urging the judge to dismiss the SEC’s lawsuit alleging securities fraud by Terraform Labs and Do Kwon.
Specifically, Terraform Labs argues that the SEC has failed to prove they were selling securities or engaged in fraudulent activity. The evidence presented by the SEC is deemed irrelevant and insufficient to substantiate the allegations in the lawsuit.
Additionally, Terraform Labs raises concerns about the SEC relying on an economic analysis conducted by a Rutgers University economics professor as the basis for their lawsuit, citing it as “deficient in terms of concepts and methodology.”
At present, it remains unclear whether the proposal, submitted to Judge Jed Rakoff of the Southern District Court of New York, will be approved, but Terraform’s previous efforts to dismiss the case have not succeeded.
Meanwhile, as Terraform Labs faces legal actions, the trial of Daniel Shin, co-founder of Terraform Labs, officially took place in South Korea on October 30th. Daniel Shin is facing allegations of unlawful fundraising and market manipulation.
However, Daniel Shin denies all accusations against him, attributing Terra’s downfall primarily to Do Kwon’s poor management. Do Kwon had managed Anchor Protocol, a DeFi lending protocol that allowed users to borrow and lend UST, in an “improper manner.”
Furthermore, Daniel Shin defends himself by stating that he severed ties with Do Kwon in 2020, so blame should not be placed on the Terra ecosystem’s failure.
It’s worth noting that Terraform Labs collapsed in May 2022 when the algorithmic stablecoin UST de-pegged, causing the LUNA token to lose 99% of its value. This event resulted in over $60 billion in losses for investors and led to legal actions in multiple countries, including South Korea and the United States.
As for Do Kwon, after evading authorities for an extended period, he was arrested in Montenegro and sentenced to 4 months in prison for using a fake passport. Both the United States and South Korea are currently working on extraditing Do Kwon.