Terraform Labs & SEC
Argue Summary Judgment After Do
Kwon Extradition OKed
by
Matthew Russell Lee, Patreon Book
Substack
SDNY
COURTHOUSE,
Nov 30 – The SEC's case
against Terraform Labs
is moving toward a January
2024 trial. That is, unless
summary judgment is granted -
arguments were held on
November 30, see thread
and below. On November 17 US
District Court for the
Southern District of New York
Judge Jed S. Rakoff held a
hearing on potential trial
experts. Inner City Press live
tweet, thread.
Five days
later, Judge Rakoff barred
defense experts Unny and
Parlour - and in
Montenegro, the Basic
Court in Podgorica approved
the extradition of Terra
founder Do Kwon, with the
destination of the extradition
to be made by the Montenegrin
justice minister after Kwon
serves out his four-month
prison sentence in Montenegro
for document forgery.
On November 30,
there were summary judgment
motion arguments. Inner City
Press was there and live
tweeted, thread:
All rise! Judge
Rakoff: We have an hour, at
4:30 I must attend training of
our newly confirmed judge.
First, we must address Mr
Unny's submission - at the
Daubert hearing, I struck Mr
Unny as an expert...
Judge: So
it seems like an unauthorized
submission. But I will
consider it on summary
judgment. SEC lawyer: Do Kwon
and Terra committed fraud with
Luna, with fake transactions
Judge: How
can intent be a matter of
summary judgment? SEC lawyer:
Do Kwon said, We are not using
the Terra blockchain.
SEC lawyer: On
the de-peg, Kwon said he was
speaking to Jump, to deploy
$100 million to buy up UST.
The lied that the algorith had
healed itself. The defendants
have no evidence, and they
don't contest ours. We have
whistleblowers [now sealed?]
SEC lawyer:
They point to a Chai merchant
agreement - but it says "IF
Terra's services are
integrated" - if. Do Kwon lied
on Medium.SEC lawyer: With
respect to Howey, there is no
issue --
Judge: A swap has
a definition, how does this
qualify? If the holder bears
all the risk? SEC lawyer: The
minter bears risk. Judge: Let
me hear from your adversary.
Terra/Do lawyer: The SEC bears
the burden
Judge: I
understand you don't agree
with my interpretation of
Howey, but I decided that on
the motion to dismiss.
Terra/Do lawyer: We disagree
that the motion to dismiss
could decide that. Judge: How
can there not be summary
judgment on unregistered
securities?
Terra/Do lawyer:
There are still the
exceptions. Judge: That's
mostly legal issues, but
perhaps not entirely... WHat
about fraudulent intent?
Terra/Do lawyer: This is the
reverse of a 10(b) case. There
are factual disputes about
Jump
Terra/Do lawyer:
There were factual disputes
even in the "Dawbert" hearing-
Judge Rakoff: Mr Daubert
pronounces it DOWbert, the
Brooklyn pronunciation [Quiet
laughter in the courtroom]
2d Terra / Do
lawyer: The SEC has
misrepresented Do Kwon's
statements. The whistleblower
whose name we are not supposed
to say, he withheld some of
his recordings.
2d Terra/Do
lawyer: The discussion between
Do and Chin was noy about
Chai. There was Project
Santa. A bit more-
Judge: Quickly. 2d Terra/ Do
lawyer: The engineer said he
thought settling was occurring
through the LP server
2d Terra/
Do lawyer: The affiant has
been caught lying. And Dr
Edmonds has admitted he
doesn't know how it works.
Judge: Rebuttal? Terra/Do
lawyer: Can we have a minute
of that on our motion? Judge:
You can have 2 minutes.
[Smiles] SEC lawyer: Do lied
on Discord
SEC lawyer: Paul
Kim of Terraform had made
admissions... The transactions
were in fiat, not on the
blockchain. Judge: OK, final
rebuttal. Terra/Do lawyer: The
SEC is flipflopping on the
de-peg Judge: But maybe
they're right on the law.
Judge: If this
case goes to trial, nothing is
going to stay confidential.
Judge: Adjourned.
More (Nov 30) on
Substack here
On November 27,
Judge Rakoff ordered
whistleblowers' identity and
information taken off, among
other platforms,
CourtListener: "v***SELECTED
PARTIES*** ORDER: The Court
respectfully directs the Clerk
to modify the viewing level to
Selected Parties for the
documents numbered 103-24 and
103-59 on the docket of this
case, so that only attorneys
who have entered an appearance
in the case for the SEC, Do
Hyeong Kwon, or Terraform Labs
PTE Ltd. may view these two
documents. The Court further
directs that unredacted
versions of these documents be
removed from third party
reporting services, including
Lexis CourtLink and
CourtListener. The Court puts
the parties on notice,
however, that should this case
proceed to trial, the Court
will revisit the issue of
whether whistleblower names
may remain confidential.
(Signed by Judge Jed S. Rakoff
on 11/27/2023)." We aim to
have more on this.
The SDNY criminal
case is US
v. Kwon,
23-cr-151
(Cronan)
More on Substack
here
The case is
Securities and Exchange
Commission v. Terraform Labs
Pte Ltd. et al., 23-cv-1346
(Rakoff)
***
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