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by Matthew Russell Lee, Patreon Book Substack

SDNY COURTHOUSE, March 26 – The SEC's trial against  Terraform Labs began on March 25. Inner City Press was there, thread. On November 17, 2023 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 tweeted that too, thread.

  From March 26, Day 2, thread:

OK - crypto trial of SEC v. Terraform Labs, Day 2. Courtroom is full

[Before the jury is brought in, counsel for Do Kwon asks Judge Rakoff: If we want to objection to one of the Court's questions, could we do it at sidebar? We don't want the jury to think we're sidewise with the Court. We'll see.] SEC lawyer: We have three things

Judge Rakoff: Since the jury is ready, I'll give you 2 minutes. SEC lawyer: We intend to enter into evidence a call with Do Kwon. Defense still has some objection-- Judge: Even though it's their exhibit? Terraform lawyer Pellegrino: We'd like you to see the video

 Jury entering! [Yesterday, four jurors had lettering on their shirts: a Yale sweatshirt, Alehouse, Cooperstown and a NY (football) Giants jacket. Today, only NYG and an American flag] Stipulation read: In April 2019 Terraform launched its blockchain...

Stipulation: By mid May 2022, the market capitalization was over $40 billion. By late May, Luna fell to one cent. Judge: Please call your next witness. SEC lawyer: We call Boris Revsin... Takes stand.

SEC lawyer: What did you do in 2017? Revsin: Game Theory Group

SEC lawyer: Then what? Revsin: I went to Republic. My group invested in crypto currency companies and fintechs.  SEC lawyer: How did you research?

Revsin: On-chain data. You can see activity in real time SEC lawyer: Who invested? Revsin: Family offices and others

 SEC lawyer: What did you hear about Terra? Revsin: A stablecoin getting a lot of attention from retail investors. SEC lawyer: We move to admit PX 24, email from Do Kwon to Paul at Tribe Capital: "Hi Paul - Do from Terra here... TL:DR - We are looking to raise $1B"

 SEC lawyer: What is xBTC? Revsin: Wrapped Bitcoin. SEC lawyer: What is TWAP? Revsin: The average of the trading price over a certain period of time.  SEC lawyer: What is market capitalization?

Terra lawyer: Objection, lack of foundation Do Kwon lawyer: I add 702

Judge Rakoff: Overruled. SEC lawyer: What is TVL? Revsin: Total Value Locked

SEC lawyer: What date did Do Kwon sign this? Revsin: January 25, 2022. SEC lawyer: Who ran the Luna Foundation Guard? Revsin: Do Kwon.

Judge Rakoff: Juror, what's going on?  Counsel: It was for water. Judge Rakoff.: But you cannot just leave the jury box. Tell you what, we were going to take a break in 15 minutes, we'll take it now.

 Q: Would you have wanted to know that Jump had intervened? A: Yes. Q: Take a look at these disclosures of risks - do you see, Risk of force majeure?  A: Yes. Q: Do they list, Not disclosing information? A: No. SEC: No further questions. Judge Rakoff: Next witness

It's Jonathan Moshe Kol.  SEC lawyer: Where are you from? Kol: Greenwich, Connecticut. SEC lawyer: Where did you get your degree? Kol: Berkeley. In Economics. Then I joined Morgan Stanley, fixed income. I was on the sales desk, selling bonds. Then trading.

 Kol: Then I joined Passport Capital, a hedge fund, on their crypto team. SEC lawyer: Where are they? Kol: San Francisco. Then I joined Galaxy Digital, also in the crypto sector. They had a mining business, not physical mining but crypto mining. We made investments

SEC lawyer: Where is Galaxy Digital based? Kol: I don't know where they are formally headquartered. I was their only person in San Francisco, then I came to New York. When I was in SF, I met with Do Kwon. SEC lawyer: What was the opportunity? Kol: Terra blockchain

 Kol: I was at Passport Capital then.. Then in 2021, at Galaxy, I met Mr. Kwon in New York. Then phone and video call, and chat. At least once a month. SEC lawyer: What attracted you to Terra and Luna? Kol: Terra seems to have utility even outside the crypto space

 Kol: The Terra blockchain was designed for stablecoins, and could be used for payments and e-commerce. Judge Rakoff: We'll take a break. [Thread will continue - for now, Crypto Criminal book, in advance of SBF sentencing Thursday: From amazon.com

 [With jury out] SEC lawyer: Do Kwon is out of custody. We'd like to arrange a video deposition. Do Kwon's lawyer: We think he's still in custody. Judge Rakoff: You work it out. But we are not going to pause this trial. We are adjourned. [Thread will continue]

They've back. SEC lawyer: Tell me about Chai. Kol: Like a South Korean Venmo... With the transactions on the Terra blockchain. SEC lawyer: How did you come to that understanding? Kol: Do Kwon told me. He said the 2 to 3 percent that credit cards take, cut in half

SEC lawyer: Mr. Kol, what is this? Kol: An email I sent to my colleagues at Galaxy. Defense: Objection! Hearsay! Judge Rakoff: Why did you send this? Kol: To inform my colleagues ,,, Judge: Overruled.

 SEC lawyer: Please read the 3d paragraph. Kol: The payment app is the fastest growing e-wallet in South Korea... The holy Grail was always to have an impact outside of crypto.

 SEC lawyer: If you had been told that Chai metrics were being copied onto the blockchain, would that have changed your view?

Kol: Yes.  SEC: No further questions. Judge Rakoff: Cross examination. Terraform lawyer David Kornblau: Did you take FINRA tests? Kol: Yes

 Terraform's Kornblau: FINRA didn't test you on crypto, did they? SEC lawyer: Objection! Judge Rakoff: Sustained.

Judge Rakoff: We'll continue tomorrow. Jurors, you've been prompt, keep it up - in appropriate t-shirts, I'm sure (smiles) [Jury leaves] Judge Rakoff: I have found the cross examination has dealt with Economics 101 - this case is about lies.

 Judge Rakoff: I don't see the relevance of 90% of the cross examination. I've never had to set time limits, but I'm getting close in this case. I want to see a more pinpointed examination, starting tomorrow.Defense: Your Honor, the SEC has been broadening things-

Judge Rakoff: That's why I addressed myself to both parties. I've got to leave to teach at Columbia, among other things. Adjourned.

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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