Lawyers for Terraform Labs co-founder Do Kwon have requested a federal court to reject the United States Securities and Exchange Commission’s (SEC’s) request to question him in the U.S. over the collapse of the Terra ecosystem.
In a Sept. 27 filing, Kwon’s legal team said that the SEC’s request to question him in the U.S. before Oct. 13 was “impossible” due to his detention in Montenegro with “no scheduled release or extradition date.”
Additionally, Kwon’s team said that providing a written testimony to answer the SEC’s questions would be inconsistent with his right to due process under U.S. law.
“An order mandating something that is impossible serves no practical purpose and risks undermining judicial authority.”
Notably, Kwon’s lawyers claimed that Kwon did not directly oppose a deposition, however noted that it would need to take place in Montenegro, where the Terra founder is currently out on bail.
According to the filing, the cut-off date for discovery in the SEC’s case against Kwon and Terraform Labs is Oct. 13.
Kwon’s legal team added that a Montenegrin court “informally” indicated that it may yet hold a hearing on Oct. 13 or Oct. 26, in which it would ask Kwon the SEC’s questions. However, the SEC noted that it may deem this process to be “inadequate” and pursue another deposition of Kwon after the discovery cut-off date.
The SEC sued Terraform Labs and Kwon on Feb. 16 for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”
In the lawsuit, the SEC said that Terraform and Kwon “touted and marketed” its Anchor Protocol, which at one point was advertised to pay out 20% interest on TerraUSD (UST) deposits. It also alleged Terraform and Kwon misled investors about the stability of Terra’s stablecoin.
Kwon and Terraform Labs’ chief financial officer Han Chang-Joon were arrested in Montenegro in March 2023 after allegedly using false travel documents when trying to leave the country. The two had their original passports confiscated in South Korea in October 2022.
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