Terraform Labs and SEC lawyers spar over whistleblower in court: Report

Lawyers representing the United States Securities and Exchange Commission (SEC) and Terraform Labs and co-founder Do Kwon sparred in court over information provided by a whistleblower in the securities lawsuit.

According to a transcript of court events provided by Inner City Press on Nov. 30, the SEC reiterated its claims that Terra and Kwon “committed fraud” using the Luna token, citing sealed evidence provided by an unnamed whistleblower. Kwon’s and Terra’s legal team reportedly argued the SEC was “flip-flopping” on the issue of TerraUSD (UST) depegging from the U.S. dollar.

“The SEC has misrepresented Do Kwon’s statements,” said Kwon’s and Terra’s lawyer, according to the report. “The whistleblower whose name we are not supposed to say, he withheld some of his recordings.”

OK – now at SEC v Terraform Labs & Do Kwon, Inner City Press will live tweet, thread below https://t.co/zRKCGlc0T4

— Inner City Press (@innercitypress) November 30, 2023

The arguments came in a hearing of the U.S. District Court for the Southern District of New York, in which Judge Jed Rakoff suggested that none of the filings made under seal would remain confidential should the case go to trial. On Nov. 28, the judge approved the confidential treatment of certain materials filed by Jump Crypto, the firm under scrutiny for its alleged involvement in the events leading to the depegging of UST.

Related: Do Kwon could serve prison in both US and South Korea, prosecutor says

Kwon, who was arrested by authorities in Montenegro in March for using falsified travel documents, could face extradition to either the U.S. or South Korea following a court approval of the proceedings. In addition to the SEC civil case, the U.S. Attorney’s Office charged Kwon with eight criminal counts related to fraud at Terraform Labs.

Should Judge Rakoff deny motions for summary judgment, the SEC case against Terra and Kwon will reportedly start in January 2024. Sentencing for convicted former FTX CEO Sam Bankman-Fried is scheduled for March 2024, and the trial of former Celsius CEO Alex Mashinsky is expected in September 2024 in the same district.

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