In order to spare everyone the spectacle of a full trial, the Securities and Exchange Commission (SEC) is requesting a summary judgement from a federal judge. The SEC claims that there is “no genuine dispute as to any material fact” in its case against Do Kwon and Terraform Labs.
“It is undeniable that buyers invested money, be it with fiat money or cryptocurrency assets,” the SEC stated in its document, restating the regulator’s contention that Kwon and Terraform offered securities.
According to the filing, the Howey test is satisfied when funds are pooled in a common enterprise with the expectation of profits primarily from the promoters’ efforts, which justifies a ruling in favour of the SEC.
The Howey test is a legal standard used to evaluate whether a transaction meets the requirements of an investment contract and falls under the purview of U.S. federal law’s definition of a security.
The SEC emphasised in the filing that Terraform and Kwon also engaged in fraudulent conduct and made false statements. They did this by misleading investors about the stability of UST, falsely attributing their algorithm’s price stabilisation to it while covertly arranging third-party intervention, and making false and materially omitting important information from their claims about the algorithm’s efficiency. When Terra failed in May of last year, investor wealth worth billions of dollars was lost.
All of this occurred a few days after Kwon’s defence team submitted a comparable document pleading with the court to support them because, in their view, the SEC has failed to establish that they were making securities offers.
Kwon is still serving his sentence for document forgery in Montenegro, where he was discovered using fictitious passports at an airport.
Daniel Shin, one of the co-founders of Terraform, recently testified in a South Korean court that he separated himself from the company and its operations two years before Terraform Labs failed and blamed former Kwon’s poor management for the company’s demise.