Lawyers representing the United States Securities and Exchange Commission (SEC) and Terraform Labs, along with co-founder Do Kwon, engaged in a heated courtroom battle centered around information provided by an anonymous whistleblower in a securities lawsuit.
This legal showdown, which unfolded in the U.S. District Court for the Southern District of New York, is of significant consequence to the crypto community.
On November 30, a transcript of the court proceedings, disclosed by Inner City Press, revealed that the SEC continued to assert its allegations of fraud against Terra and Kwon, specifically concerning the LUNA token.
The SEC supported its claims with sealed evidence furnished by the undisclosed whistleblower.
In response, Kwon’s and Terra’s legal team vehemently challenged the SEC’s position, accusing them of inconsistency regarding the depegging of TerraUSD (UST) from the U.S. dollar.
“The SEC has misrepresented Do Kwon’s statements,” asserted Kwon’s and Terra’s lawyer. “The whistleblower, whose identity we cannot reveal, has withheld some of their recordings.”
Judge Jed Rakoff, presiding over the case, weighed in during the proceedings, suggesting that any filings made under seal might lose their confidentiality status should the case proceed to trial.
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This development followed the judge’s approval, on November 28, of confidential treatment for certain materials submitted by Jump Crypto, a firm implicated in the events leading up to the UST depegging controversy.
Do Kwon, who had previously been arrested in Montenegro in March for allegedly using counterfeit travel documents, now faces the possibility of extradition to either the United States or South Korea, subject to court approval.
In addition to the SEC’s civil lawsuit, Kwon also faces eight criminal charges related to fraud at Terraform Labs.
The trajectory of the case hinges on Judge Rakoff’s decision regarding motions for summary judgment. Should he deny these motions, the SEC’s case against Terra and Kwon is slated to commence in January 2024.
Furthermore, former FTX CEO Sam Bankman-Fried awaits sentencing in March 2024, while the trial of former Celsius CEO Alex Mashinsky is anticipated to take place in September 2024, both in the same judicial district.
These legal battles underscore the growing regulatory scrutiny and legal challenges facing the cryptocurrency industry.
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