| Terraform Labs Crypto Trial
Day 3 Has Chai Whistleblower
Crossed About Crime
by
Matthew Russell Lee, Patreon Book
Substack
SDNY
COURTHOUSE,
March 27 – 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
27, Day 3, thread
OK - crypto trial
of SEC v Terraform / Do Kwon
Day 3, Judge Rakoff
admonishing the defense,
mostly, before the jury comes
in Jury entering! Judge
Rakoff: Thank you for being
prompt. You may proceed.
Terraform's lawyer: Mr. Kol,
did you ever hear Do Kwon on a
podcast? Kol: YouTube video or
live stream, something like
that.
Terraform's
lawyer: Please look at this
document -- SEC lawyer:
Objection! This is not in
evidence! Terraform's lawyer:
Oh, sorry. Getting sloppy.
Let's enter it... So, Galaxy
was aware of the details of
this document before
buying $4 million of Luna?
Kol: Yes.Judge Rakoff: Let me
ask the witness, some crypto
currencies are more risky that
others, correct? Terraform's
lawyer: Objection! Judge
Rakoff: Overruled. Kol: Yes.
Judge Rakoff: You may step
down. Counsel, come to the
sidebar
Now jury is
shown a video deposition of
Terraform's 30(b)(6) witness,
a lawyer: SEC lawyer: What is
Chai? Long pause. Terraform
counsel / witness: From the
company's records, we
understand it to be a payments
mechanism
[In the
video deposition being shown
to jury] SEC lawyer: Here, Do
Kwon says that Chai was not
using the Terra blockchain,
but rather a private
blockchain called Tempura. Was
Do Kwon telling the truth
here? Terraform counsel: I do
not have access to Do Kwon
Now SEC
lawyer turns to a Chai
investor presentation PX 108B
Terraform's lawyer: Objection!
Hearsay! Judge Rakoff:
Overruled. SEC lawyer: What
does it say? Witness: Chai...
powered by Terra. That is, the
blockchain
Witness:
Justin Hong, at a cafe, he
told me -- Terraform's lawyer:
Objection! Hearsay! Judge
Rakoff: Sustained. SEC lawyer:
I'll rephrase: did you have an
understanding of the basis for
separating Chai and Terra,
from whom? Witness: Justin
Hong. Judge: Sustained
SEC lawyer: How
much were you paid at Chai?
Witness: Yes, $100,000 and a
$20 million stock grant SEC
lawyer: Who promised you the
stock? Witness: Dan Shin. SEC
lawyer: Did you ever get the
stock? Witness: No.
Witness: There
was a gentleman's agreement
not to mention that Chai
wasn't using the Terra
blockchain. Some of these guys
had life-changing amounts of
Luna. This kept the value up.
SEC lawyer: What
did you think about the
gentleman's agreement you
heard about from Daniel Shin?
Witness: I thought it was
sketchy. Then I saw an
interview online of Do Kwon
where he was staying Chai used
the Terra blockchain, which
was very not true
Witness:
Basically, transactions done
on Chai were just copied and
pasted into the Terra
blockchain, to make it appear
that had happened there. They
hadn't. SEC lawyer: Did you
record a conversation?
Witness: Yes. Judge Rakoff
calls a break - thread will
continue
Now the
witness is shown Seoul court
order imposing a fine
Terraform's lawyer: This
charges a crime, right? SEC
lawyer: Objection! He has not
accepted the translation.
Witness: It's more like an
infraction. The word in Korean
is -- Terraform lawyer: Wait
til I ask
Witness:
The Korean work is "je" - it
means Wrongdoing. In the
American system, crime sounds
like more. Terraform lawyer:
In your deposition didn't you
say you couldn't fully
understand the Korean?
Witness: I understand Korean
enough to run a business in
Korea.
Terraform lawyer:
You had a trial in Korea on
this, whatever you call it?
SEC lawyer: Objection! 403!
Judge Rakoff: We'll excuse the
jury for the day. You've been
terrific. [Jury leaves]
[After jury
leaves] Judge Rakoff: Not that
any of you have even gotten a
parking ticket, but in New
York if you want to just pay
the fine, you have to plead
guilty, it's considered a
crime. I'm going to run off
for other matters.
Judge Rakoff
adds: I need to leave to teach
criminal law at Colombia Law
School. After that, I'm sure
you'll think it's frivolous,
my wife and I go dancing, our
lobby is ballroom dancing. So
I won't read until 11 pm.
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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