US Judge Denies Terra's Do Kwon's Bid to Block SEC from Accessing Singapore Records
Do Kwon, the co-founder and CEO of Terraform Labs (TFL), a Singapore-based blockchain company behind the algorithmic stablecoin TerraUSD (UST) and its native token LUNA, has lost a legal battle against the U.S. Securities and Exchange Commission (SEC) over his company's records in Singapore. 😱
The SEC, which has sued Kwon and TFL for allegedly orchestrating a multi-billion-dollar crypto asset securities fraud involving UST and other crypto asset securities, has been granted access to documents held by the Singapore Monetary Authority (SMA), the country's financial regulator, that are related to TFL and its affiliate Luna Foundation Guard (LFG). 📄
Kwon and TFL had tried to prevent the SEC from obtaining these documents, arguing that they were irrelevant, privileged, or confidential. However, U.S. District Judge Jed Rakoff rejected their request last Friday, saying that they had failed to show any merit or basis for their objections. 😬
What are the SEC's allegations against Kwon and TFL?
The SEC filed its complaint against Kwon and TFL on Feb. 16, 2023, accusing them of misleading investors about the stability and legality of UST, which is supposed to be pegged to the U.S. dollar by an algorithm that adjusts its supply according to market demand. 🤥
The SEC claimed that UST lost its peg in April 2021, when it dropped as low as $0.70, and that it was only restored by a deliberate intervention by a U.S. trading firm that bought up UST at below-market prices. The SEC alleged that Kwon and TFL concealed this fact from investors and instead attributed the re-pegging to the effectiveness of their algorithm. 😲
The SEC also alleged that Kwon and TFL sold unregistered securities and unregistered security-based swaps in the form of LUNA tokens and LFG tokens, respectively, without complying with the federal securities laws. The SEC said that LUNA tokens were used to fund the development of TFL's blockchain platform, while LFG tokens were used to raise money for maintaining UST's peg. 😳
What are the documents that the SEC wants from Singapore?
The SEC has requested the SMA to provide documents related to TFL and LFG that are in its possession or control. The SMA is the equivalent of the SEC in Singapore and has regulatory authority over TFL and LFG as entities incorporated or operating in Singapore. 🇸🇬
The documents that the SEC seeks include corporate records, financial statements, bank statements, transaction records, communications, contracts, agreements, memoranda of understanding, marketing materials, disclosures, reports, audits, inspections, investigations, sanctions, or any other information relevant to its case against Kwon and TFL. 🔎
The SEC believes that these documents will help it prove its allegations of fraud, misrepresentation, and violation of securities laws by Kwon and TFL. The SEC also hopes to identify other potential witnesses or co-defendants who may have been involved in or aware of Kwon and TFL's activities. 🕵️♂️
What are the implications of this ruling for Kwon and TFL?
This ruling is a major setback for Kwon and TFL, who have been trying to fend off the SEC's lawsuit by challenging its jurisdiction, authority, and evidence. By gaining access to their records in Singapore, the SEC may be able to strengthen its case and undermine their defenses. 😓
Kwon and TFL may also face legal troubles in Singapore if the SMA finds any wrongdoing or irregularity in their records or operations. Singapore has strict laws and regulations for crypto businesses and has recently issued new guidelines for digital payment token service providers. 😨
Kwon and TFL have not commented publicly on this ruling or their ongoing litigation with the SEC. They have previously stated that they believe UST is not a security and that they have cooperated with the SEC's inquiries. They have also claimed that UST is a decentralized and algorithmic stablecoin that is not controlled by any central authority. 😕
How has UST performed in the market?
UST was launched in September 2020 as a stablecoin that aims to maintain a 1:1 peg with the U.S. dollar by using an algorithm that adjusts its supply according to market demand. UST holders can also earn interest by staking their coins in Terra's savings protocol called Anchor. 🚀
UST initially maintained its peg well, reaching an all-time high of $1.0468 on Jan. 30, 2021. However, in April 2021, UST experienced a severe de-pegging event, when it dropped as low as $0.70 amid a market crash that affected many crypto assets. UST recovered its peg shortly after, but only with the help of a U.S. trading firm that intervened to buy up UST at below-market prices. 😱
Since then, UST has faced more volatility and challenges, such as regulatory scrutiny, network issues, and competition from other stablecoins. UST reached an all-time low of $0.006218 on June 18, 2022, when the Terra blockchain was temporarily halted due to a bug. UST also changed its name to TerraClassicUSD (USTC) in July 2022, after a community vote to rebrand the coin and distance it from the SEC's lawsuit. 😔
As of April 19, 2023, USTC is trading at $0.02268, down 97.83% from its all-time high and up 264.81% from its all-time low. It has a market cap of $222 million and a 24-hour volume of $11 million. It is ranked #156 among all cryptocurrencies by market cap. 📉
The Bottom Line
The SEC's lawsuit against Kwon and TFL is one of the most high-profile cases involving a stablecoin issuer and a crypto entrepreneur. The outcome of this case could have significant implications for the future of USTC and other algorithmic stablecoins, as well as the regulation of crypto assets in general. 🤔
Will Kwon and TFL be able to defend themselves against the SEC's allegations? Will USTC be able to regain its peg and popularity among crypto users? Will the SEC be able to crack down on crypto fraud and protect investors' interests? These are some of the questions that remain unanswered as this legal drama unfolds. 😮
If you are interested in learning more about USTC or other stablecoins, you can check out our TerraUSD price prediction or our CoinStats news article on this topic. You can also buy, sell, or trade USTC and other crypto assets on our platform with ease and security. 💯
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