The US Securities and Exchange Commission (SEC) has turned its attention to Do Kwon, co-founder of the now-defunct Terraform Labs and LUNA. The regulatory body is insisting on an in-person questioning to delve deeper into the reasons behind Terra’s ecosystem collapse. However, Do Kwon is not willing to give in easily. He and his legal team are challenging the SEC’s summons, arguing that the request is not only impractical but also a violation of Do Kwon’s rights to a fair trial.
Legal dilemma and Kwon’s detention
Documents filed in court shed light on the complexity of the situation. Do Kwon is currently detained in Montenegro. Given the uncertainty of his release or a possible extradition, complying with the SEC’s deposition request in the US before October 13 seems out of reach. The legal team’s statement, filed in the Southern District of New York, reinforces this perspective, asserting that the SEC’s call to action violates the Court’s individual practice rules.
While the attorneys emphasize Do Kwon’s willingness to cooperate, they insist that the interrogation should take place in Montenegro, considering his current situation. With a potential hearing in Montenegro set for October 13 or 26, there is an opportunity for Kwon to address the SEC’s concerns face to face. However, the SEC may remain unsatisfied, citing an extended interrogation beyond the proposed schedule.
Allegations and the Anchor protocol
At the heart of this legal battle is the Anchor protocol, once marketed as a lucrative opportunity promising a 20% yield on deposits in TerraUSD (UST). However, on February 16, accusations were made against Terraform Labs and Kwon, alleging their involvement in a “multi-billion dollar crypto asset securities fraud. Furthermore, the allegations suggest that investors were misled about the stability of the Terra stablecoin.
