South Korean cryptocurrency entrepreneur, co-founder of Terraform Labs (Terra Luna), Do Kwon (L), is taken to court in Podgorica on May 11, 2023, following his arrest on March 24 at the Montenegrin capital's international airport. (Photo by SAVO PRELEVIC / AFP)
As jurors were deciding the fate of FTX co-founder Sam Bankman-Fried in his criminal case, US regulators pushed forward with a civil lawsuit against another former crypto mogul, Do Kwon.
The Securities and Exchange Commission in a court filing Thursday asked a Manhattan judge to rule on its case against Kwon and his company, Terraform Labs, without a full trial, also known as summary judgment.
The evidence against the crypto entrepreneur "is clear, undisputed and overwhelming,” the regulator said. It plainly shows, according to the SEC, that Terraform Labs’ crypto assets "and the means by which they were offered and sold” met the standards of the decades-old Howey Test for determining when something is a security.
Lawyers for Kwon and Terraform Labs sought summary judgment in the case last week.
The SEC sued the company and co-founder Kwon in February, alleging that they offered and sold unregistered securities as part of a fraudulent scheme that wiped out at least $40 billion worth of market value.
The firm’s once-popular TerraUSD, or UST, was designed to maintain a peg to the US dollar through an algorithm and trading in a sister token called Luna.
The arrangement failed spectacularly when the stablecoin crashed in May 2022, kicking off a domino effect that resulted in the bankruptcies of several other high-profile crypto companies - most notably, Bankman-Fried’s FTX.
US prosecutors also indicted Kwon on criminal fraud charges in March, hours after he was arrested in Montenegro for attempting to travel with a forged passport. He received a four-month prison sentence from a Montenegrin court for that violation. He’s also wanted on fraud charges in South Korea.
The recent SEC filing in the Terraform Labs case came the same day that a Manhattan jury found Bankman-Fried guilty of seven counts of fraud and conspiracy.
