Do Kwon’s Legal Challenge to SEC’s Request
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 ecosystem.
Kwon’s Detention in Montenegro
In a recent Sept. 27 filing, Kwon’s legal team highlighted that the SEC’s request for U.S.-based questioning before Oct. 13 was not feasible. This is due to Kwon’s detention in Montenegro with “no scheduled release or extradition date.” They also pointed out that providing written testimony in response to the SEC’s queries would be inconsistent with Kwon’s right to due process as per U.S. law.
Kwon’s representation stressed, “An order mandating something that is impossible serves no practical purpose and risks undermining judicial authority.”
Deposition in Montenegro?
While Kwon is not directly against a deposition, his lawyers emphasize that it should be held in Montenegro. This comes in light of his current bail conditions in the country. The filing reveals that the final date for discovery in the SEC’s lawsuit against both Kwon and Terraform Labs is scheduled for Oct. 13.
Furthermore, it’s indicated that a Montenegrin court might conduct a hearing on either Oct. 13 or Oct. 26. During this session, the court might present Kwon with the SEC’s inquiries. Yet, the SEC has shown reservations about this approach. They believe it may be “inadequate” and might pursue a separate deposition for Kwon post the discovery cut-off.
Backdrop of the Lawsuit
The root of the contention dates back to Feb. 16 when the SEC initiated a lawsuit against Terraform Labs and Kwon. They were accused of “orchestrating a multi-billion dollar crypto asset securities fraud.”
The lawsuit underscores that both Terraform and Kwon “touted and marketed” its Anchor Protocol. Notably, it promised a staggering 20% interest on TerraUSD (UST) deposits at one juncture. Additionally, the SEC alleges that they misled investors about Terra’s stablecoin’s solidity.
A significant development occurred in March 2023. Both Kwon and Terraform Labs’ CFO Han Chang-Joon were detained in Montenegro. The charges were for allegedly using falsified travel documents when trying to exit the nation. Interestingly, their original passports were confiscated earlier in South Korea, in October 2022.