Do Kwon and Terraform Labs ask judge to toss SEC’s lawsuit

Terraform Labs co-founder Do Kwon has requested a United States district judge reject a securities and fraud lawsuit from the United States Securities and Exchange Commission, claiming it has failed to prove he or his firm did anything wrong.

In an Oct. 27 filing in the U.S. District Court for the Southern District of New York, lawyers for Kwon and Terraform argued its cryptocurrencies Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and its mirrored assets (mAssets), which reflect stocks on-chain, are not securities as the SEC alleges.

“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,” asserting 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 TerraUSD (UST) 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 United States.

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