Crypto news: the SEC is seeking conviction in the Terra/Luna case as well

After Sam Bankman-Fried’s conviction in the FTX case, now the SEC is also seeking a conviction for the implosion of the Terra ecosystem with its crypto Luna. 

In fact, the agency has submitted a lengthy memorandum to the US District Court for the Southern District of New York in which it states in no uncertain terms that Do Kwon is allegedly responsible for several violations of US laws. 

Terra/Luna implosion: SEC vs failed crypto project

Unlike FTX, the Terra/Luna ecosystem was not based on a crypto exchange. 

Instead, it was based on an algorithmic stablecoin, UST, collateralized precisely with the Luna cryptocurrency. 

When Luna’s market value collapsed in May last year, UST eventually imploded as well, collapsing the entire house of cards that had been built on top of it. 

In fact, thus imploded the entire crypto Terra ecosystem, although it was later somewhat resurrected, albeit in a hugely limited form. Suffice it to say that before the collapse the market value of the Luna cryptocurrency was over $80, while now that it has been renamed LUNC (Terra Classic) it has fallen to 62 millionths of a dollar. 

In theory, it would not be possible to rule out the possibility that this implosion was caused solely by adverse market conditions, but the SEC believes that there are instead clear responsibilities attributable to Do Kwon, the project’s founder. 

Do Kwon’s responsibilities

According to the SEC, Do Kwon and his company Terraform Labs allegedly set up an actual scam scheme. 

The agency claims that there is clear evidence that they were responsible for various violations of various regulations, so much so that they should also be held responsible for the damage caused to investors by the implosion of the Terra/Luna ecosystem. 

In particular, they accuse Kwon of lying to investors by claiming that UST was a safe stablecoin, when in fact it later proved to be a total failure. 

UST actually still exists, although it has been renamed USTC (Terra Classic USD), but it has completely lost its peg with the dollar, so much so that its market value has now plummeted to one cent on the dollar. 

Do Kwon is currently in jail, but in Montenegro. The US would like him to be extradited so that he can be tried in person, but he is a Korean citizen whom the South Korean authorities would also like to be extradited so that he can be tried in person. 

It is therefore possible that he will not be extradited to the US, and will have to be tried in absentia, and perhaps that is why the SEC is asking for a speedy trial. 

The trial

The actual trial of Do Kwon, in attendance, will probably be held in South Korea if he is extradited from Montenegro, so a different court proceeding will probably be held in the US in his absence. 

The SEC has asked for what in technical jargon is called a “summary judgment,” that is, a judgment of conviction issued by the court but without an actual full trial being held. 

Then again, it seems that a full trial of Do Kwon in the US cannot be held, so summary judgment would still be a ruling that, in the absence of a real trial, is already better than nothing. 

What’s more, since summary judgment is a court proceeding in which there is only one judge who issues a ruling, it could also be obtained quickly. 

Note that the implosion of the Terra/çuna ecosystem occurred more than a year ago, and Do Kown’s arrest was in March of this year. 

In the meantime, several pieces of evidence have been unearthed that would seem to point rather clearly to Do Kwon’s responsibility, according to the SEC’s evidence, so the agency’s request seems far from absurd. 

Not least because, eight months after his arrest, the fact that he has not yet been extradited from Montenegro makes it quite clear that the will to extradite him is indeed lacking. On the other hand, Kwon is in jail serving crimes committed in Montenegro, so the European country has every right to keep him in its prisons.