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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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