3 - 4 minute read
The US Securities and Exchange Commission (SEC) has sued Do Kwon, co-founder of Terraform Labs, for allegedly defrauding US investors by illegally offering unregistered securities. However, Kwon’s lawyers have requested to dismiss the lawsuit, claiming that US law prohibits regulators “from using federal securities law to assert jurisdiction over the digital assets in this case.” The lawyers also argued that the SEC failed to prove that Kwon had defrauded US investors in connection with Terra’s $40 billion collapse of the TerraUSD (UST) and Luna (LUNA) cryptocurrencies. According to the lawyers, the stablecoin at issue is a currency, not a security.
Kwon was arrested in Podgorica airport, Montenegro on March 23, while attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested the entrepreneur’s extradition. At the time of writing, it remains unclear as to which country, if any, would be the most likely to be granted the extradition of Kwon.
The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong. While prosecutors saw Kwon’s arrest as an opportunity to pin down Shin, the court denied the request while citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence.
The allegations against Kwon and the legal proceedings surrounding his arrest and extradition could have significant implications for the cryptocurrency market. If the SEC’s allegations are unfounded and Kwon is exonerated, it could boost investor confidence in the digital asset market. On the other hand, if Kwon is found guilty, it could lead to stricter regulations and increased scrutiny of the cryptocurrency market.
According to Bloomberg, the SEC has been cracking down on fraud and misconduct in the digital asset industry in recent years. In 2020, the regulator brought 56 enforcement actions against individuals and companies in the industry, compared to just 10 in 2016. This increased scrutiny has led to a more cautious approach from some investors, who are wary of the risks associated with investing in digital assets.
The Bottom Line
The legal proceedings surrounding Do Kwon and Terraform Labs could have significant implications for the cryptocurrency market. If Kwon is exonerated, it could boost investor confidence in the digital asset market. However, if he is found guilty, it could lead to stricter regulations and increased scrutiny of the cryptocurrency market. Traders should keep a close eye on the outcome of the legal proceedings and adjust their investment strategies accordingly.
