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Terra’s Do Kwon Believes SEC Should Dismiss its Case Against Him Due to XRP Precedent

Published July 21, 2023 12:21 PM
Omar Elorfaly
Published July 21, 2023 12:21 PM

Key Takeaways

  • Do Kwon’s lawyers are trying to scrap the SEC lawsuit against him
  • The South Korean court supports Do Kwon’s claims
  • Terra Labs CEO has yet to appear before any judge

In light of the recent Ripple vs the US Securities and Exchange case, attorneys representing Terraform Labs and CEO Do Kwon attempt to dismiss their own SEC case. Among the many charges filed against Do Kwon by the SEC is one concerning the sale of UST, LUNA, and wLUNA, which the regulating body sees as unregistered securities.

Do Kwon is still considered a fugitive as he’s staying in Montenegro, avoiding court appearances in South Korea or the US. 

In the meantime, the South Korean court released statements that support Do Kwon’s claims while proceeding with a case against his partner Daniel Shin.

Is Luna A Security?

The Ripple case created a change of tides in the crypto market as many defendants in SEC cases are now claiming their token offerings were not actually sales of securities.

Judge Torres, the judge presiding over Ripple’s case ruled that XRP, the token developed by Ripple is indeed not a security as it doesn’t provide a guarantee of profit. On top of that, sales of XRP didn’t involve instructions on whether the money was transferred to Ripple or to other sellers. 

Moreover, Judge Torres didn’t request any additional documents to prove that XRP is a commodity, not a security.

In Terraform Labs’ case, Judge Jed Rakoff requested  additional documents from both the defendants and the plaintiffs to make an educated decision on whether the case should be dismissed.

Do Kwon and Terra argue that UST, LUNA, and wLUNA are not securities as they were not sold in the same volumes as XRP was. However, the SEC argues that the altcoins are indeed securities that the company sold in an unregistered manner.

A South Korean court’s decision actually supports Terra’s claims that LUNA is not a security. The court sees that the sales of LUNA and MIR were too minuscule to be considered securities. Instead, South Korean authorities see that sales of LUNA and MIR were just a way to encourage participation in the Terra ecosystem.

Do Kwon Still On The Run

Terraform Labs founder Do Kwon is reportedly still in Montenegro where he was arrested for using counterfeit travel documents while trying to fly to Dubai. He posted bail worth €400,000 awaiting a trial regarding his false documents case.

Do Kwon claims that he was “unaware” of the inauthenticity of his travel documents, but he was still sentenced to mere four months in jail, most of which the court sees as already served. 

More importantly, Montenegro is perhaps the perfect hideout for Do Kwon as the country does not hold any extradition agreements with South Korea or the United States where the Terraform Labs CEO is expected to stand tried for alleged crimes.

Meanwhile, Terra co-founder, Daniel Shin’s case has already gone through its first preliminary hearing which he did not attend. Shin was indicted on April 25th by the South Korean authorities on multiple charges, including violations of the Capital Markets Act, breach of duty, and embezzlement for his involvement with Terra-Luna.

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