In a recent motion filed to dismiss the charges leveled against him by the Securities and Exchange Commission (SEC), Do Kwon, co-founder and CEO of Terraform Labs, argued that the claims are invalid and that the SEC lacked proper jurisdiction to bring charges against him and his company. Kwon’s counsel stated that the tokens and projects developed by Terra were “aimed at the world” and did not specifically target U.S. investors, making the SEC’s claims invalid.
The SEC had previously claimed that tokens including MIR, LUNA (LUNA), and UST are securities, but Kwon pushed back against this argument in his motion to dismiss the charges. The South Korean district court recently dismissed security violation charges against the co-founder of Terraform Labs, Hyun-seong Shin, deeming LUNA as a non-security under Korea’s Capital Markets Act. This ruling makes Kwon’s motion right only in connection to LUNA.
However, recent developments suggest that Kwon’s legal troubles may not be over. In a press conference after the Seoul Southern District Prosecutor’s office indicted 10 people involved in the collapse of the Terra stablecoin ecosystem, the prosecutor reportedly identified Signum as the Swiss bank account where Kwon transferred more than 10,000 Bitcoin (BTC) from the Terra platform and the Luna Foundation Guard to a cold wallet, which was then converted to fiat.
The Financial and Securities Crime Joint Investigation Unit of the Seoul Southern District Prosecutor’s office is reportedly monitoring Bitcoin owned by Luna Foundation Guard and has determined that the transferred amount, which aligns with the SEC complaint, is approximately $100 million (equivalent to 130 billion won). The prosecutors clarified that the $100 million was not kept solely in the Signum account and was dispersed in various locations. It was verified that a portion of the funds was transferred to the Kim & Chang law firm account to cover legal fees, while the rest amounted to billions of won.
Kwon’s legal troubles began when the SEC filed charges against him and his company, which preempted his arrest in Montenegro, where he currently faces extradition. South Korean authorities had issued an arrest warrant for Kwon in September, and U.S. federal prosecutors unveiled criminal charges against him shortly after he was arrested a month ago.
In conclusion, while Do Kwon has requested the dismissal of SEC charges against him, recent developments suggest that his legal troubles may not be over yet. It remains to be seen how this situation will develop and how it will affect the future of Terraform Labs.