Lawyers representing Terraform Labs and its co-founder Do Kwon asked a New York judge to make a decision in a case brought by the Securities and Exchange Commission without a full trial, arguing that they didn't do anything wrong.
The lawyers said the SEC could not prove that they offered or sold securities, though the agency had argued in a complaint in February that the firm had. The regulator referenced the now infamous algorithmic stablecoin Terra USD that collapsed back in May 2022.
"But 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 said in a motion for a summary judgment last week.
The SEC sued Kwon and Terraform in February and said the company raised billions from investors by "offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions." SEC Chair Gary Gensler also said that Terraform and Kwon didn't provide investors with full disclosures, notably for LUNA and Terra USD.
Algorithmic stablecoins, like Terra USD, use market incentives via algorithms to maintain a stable price. Terra was linked to Luna, a governance token, to keep the prices stable. Billions were wiped out when Terra USD crashed.
Judge Jed Rakoff, who is overseeing the case in the Southern District of New York, has previously rejected an attempt by Terraform Labs and Kwon to dismiss the case.
Swiss bank account
Kwon and Terraform specifically pushed back on the SEC's claims that they moved millions of dollars into Swiss bank accounts for their personal gain. The SEC said the company and Kwon transferred 10,000 bitcoin to a financial institution based in Switzerland, according to the agency's complaint.
Lawyers for Kwon and Terraform say that allegation is false.
"In a more outrageous example, in a transparent attempt to make this case seem like FTX, Celsius, and other cases involving thefts of customer funds, the SEC alleges that Defendants secretly moved millions of dollars into Swiss bank accounts for personal gain," the lawyers said.
The SEC declined to comment on the request for summary judgment.
In a separate action, lawyers for Terraform Labs co-founder Daniel Shin said Shin had "nothing to do with the collapse" in a Seoul district court, according to Munhwa Broadcasting Co.
Shin was indicted in April in South Korea for several charges including fraud.
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