Lawyers representing Do Kwon, the co-founder of Terraform Labs, have filed a request with a federal court to reject the United States Securities and Exchange Commission’s (SEC) request to question Kwon in the U.S. regarding the collapse of the Terra Money ecosystem. In their filing on September 27, Kwon’s legal team argued that it is “impossible” for Kwon to be questioned in the U.S. before October 13 due to his detention in Montenegro and the lack of a scheduled release or extradition date.
Furthermore, Kwon’s lawyers emphasized that providing a written testimony to answer the SEC’s questions would be a violation of his right to due process under U.S. law. They stated that “an order mandating something that is impossible serves no practical purpose and risks undermining judicial authority.” Kwon’s team also clarified that he did not directly oppose a deposition but insisted that it should take place in Montenegro, where he is currently out on bail.
According to the filing, the deadline for discovery in the SEC’s case against Kwon and Terraform Labs is October 13. Kwon’s legal team revealed that a Montenegrin court has informally indicated that it might hold a hearing on either October 13 or October 26, during which Kwon would be asked the SEC’s questions. However, the SEC suggested that it may consider this process inadequate and pursue another deposition of Kwon after the discovery cut-off date.
The SEC initially sued Terraform Labs and Kwon on February 16, alleging their involvement in a multi-billion dollar crypto asset securities fraud. The lawsuit stated that Terraform and Kwon promoted their Anchor Protocol, which advertised a 20% interest rate on USTC deposits. The SEC also accused them of misleading investors about the stability of Terra’s stablecoin.
In March 2023, Kwon and Terraform Labs’ CFO Han Chang-Joon were arrested in Montenegro for allegedly using false travel documents when attempting to leave the country. Their original passports had been confiscated in South Korea in October 2022.
The outcome of this court filing will determine whether Kwon will be questioned by the SEC in the U.S. or if an alternative method will be pursued, such as holding a deposition in Montenegro. As the deadline for discovery approaches, both parties will continue to navigate the legal proceedings surrounding the collapse of the Terra Money ecosystem.
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