Do Kwon’s Lawyers Block SEC Deposition Request: Extradition Battle Intensifies

The saga surrounding Terraform Labs co-founder Do Kwon takes another dramatic turn as his legal team pushes back against the U.S. Securities and Exchange Commission (SEC). Kwon’s lawyers have formally requested a federal court to deny the SEC’s plea to question him in the United States regarding the infamous collapse of the Terra ecosystem. Why? Well, it’s a complex web of legal hurdles, international complications, and a ticking clock. Let’s dive into the details.

Why is Do Kwon’s Deposition Request Being Rejected?

In a recent filing on September 27th, Kwon’s legal representatives stated that the SEC’s demand for him to appear in the U.S. for questioning before October 13th is simply “impossible.” The core reason? Kwon is currently detained in Montenegro, facing charges related to using a fake passport.

Here’s a breakdown of the key arguments from Kwon’s legal team:

• Impossibility due to Detention: Kwon is imprisoned in Montenegro and there’s no confirmed date for his release or extradition. Asking him to appear in the U.S. by October 13th is practically unfeasible.
• Due Process Concerns: Providing written testimony to answer the SEC’s queries, as an alternative, is argued to be inconsistent with Kwon’s right to due process under U.S. law.
• Undermining Judicial Authority: Kwon’s lawyers argue that ordering something impossible sets a bad precedent and could weaken the court’s authority.

Interestingly, Kwon’s team isn’t entirely against a deposition. They’ve indicated that Kwon is open to being questioned, but it would need to happen in Montenegro, where he is currently out on bail while appealing his passport conviction.

The SEC’s Case and the Looming Deadline

The SEC’s case against Do Kwon and Terraform Labs is serious. The discovery cut-off date for this case is fast approaching – October 13th. This deadline adds significant pressure to the situation.

The Montenegrin court has “informally” suggested they might hold a hearing around October 13th or 26th to address the SEC’s questions to Kwon. However, the SEC has already hinted that they might find this process “inadequate” and may pursue another deposition of Kwon even after the discovery deadline.

What are the SEC’s Allegations Against Do Kwon and Terraform Labs?

The SEC’s lawsuit, filed back in February 16th, accuses Terraform Labs and Do Kwon of orchestrating a massive “multi-billion dollar crypto asset securities fraud.” The core of the SEC’s allegations revolves around:

• Anchor Protocol Misleading Marketing: The SEC claims Terraform and Kwon heavily promoted the Anchor Protocol, which promised an incredibly high 20% interest rate on TerraUSD (UST) deposits. They argue this was misleading and unsustainable.
• TerraUSD (UST) Stability Deception: The SEC alleges that Terraform and Kwon misled investors about the true stability of their stablecoin, UST. The dramatic collapse of UST and its sister token LUNA wiped out billions of dollars in investor funds and triggered a significant downturn in the crypto market.

The Fake Passport Saga and Arrest in Montenegro

Adding another layer of intrigue, Do Kwon and Terraform Labs’ CFO, Han Chang-Joon, were arrested in Montenegro in March 2023. Their arrest stemmed from allegedly attempting to leave the country using falsified travel documents. This happened after their original passports were confiscated in South Korea in October 2022. This arrest has significantly complicated the legal landscape and the extradition requests from both the U.S. and South Korea.

What’s Next in this Legal Drama?

The situation remains highly fluid. Here are the key factors to watch out for:

• Montenegro Court Decisions: The Montenegrin court’s decision on the SEC’s deposition request and the extradition requests from both the U.S. and South Korea will be crucial.
• SEC’s Next Moves: Will the SEC accept a deposition in Montenegro, or will they push for extradition and a U.S.-based deposition even after the discovery deadline?
• Kwon’s Legal Strategy: Kwon’s legal team is clearly playing a strategic game, leveraging his detention in Montenegro to delay and potentially complicate the SEC’s investigation.

The legal battle surrounding Do Kwon and the Terra collapse is far from over. It’s a high-stakes game with international implications, impacting not just Kwon and Terraform Labs, but also setting precedents for crypto regulation and international law enforcement in the digital asset space. Stay tuned as this story continues to unfold.