Terraform Labs, facing a securities lawsuit from the U.S. Securities and Exchange Commission (SEC), filed a motion for summary judgment on December 4, 2023 to resolve the case.
Citing the treatment of a separate company, DEBT Box, in an ongoing SEC lawsuit, the defense pointed out that the regulatory agency in that case misrepresented the facts, the chairman said.
The U.S. Securities and Exchange Commission (SEC) originally charged Terraform Labs and its co-founder in Do Kwon in February 2023. The SEC alleged that the defendants raised billions of dollars by selling unregistered securities prior to the project’s collapse and stock devaluation. are cryptocurrencies.
In October, Terraform Labs initiated a motion for summary judgment after an unsuccessful motion to dismiss the case. Terra’s legal team now says another SEC case supports the summary judgment request.
That separate case involves an unrelated company called Digital Licensing Inc. (dba DEBT Box), in which a judge criticized the SEC’s actions. According to Terra’s legal representation, Judge Robert J. Shelby ruled that the SEC “made false representations to the Court that were so serious that the Court ordered the SEC to demonstrate why sanctions should not be imposed.”
The latest filing says the DEBT Box case impacts the SEC’s “general use of evidence” in the Terra case. It also affects part of the SEC’s amended complaint, which alleges that Terraform Labs and Kwon retained control of or moved funds (as set forth in paragraph 173 of that complaint).
Details of the DEBT Box case
According to a December 1 report from Fortune, the SEC alleged this summer that DEBT Box defrauded investors of $50 million by selling unregistered securities.
The U.S. Securities and Exchange Commission (SEC) initially obtained a temporary restraining order and asset seizure against a crypto company through an ex parte filing, a unilateral proceeding in which the company could not contest the proceedings. This is generally used when there are concerns about destroying evidence or moving assets abroad. The SEC alleged that the company was actively closing bank accounts to move operations to Abu Dhabi, outside U.S. jurisdiction.
However, U.S. District Judge Robert Shelby later ruled that these allegations were false, finding that the accounts had been closed within the specified 48-hour time frame and that the company had already moved most of its operations months earlier. The judge expressed concern about the SEC’s misrepresentation and failure to correct the error.
A file shows that the restraining order was previously dissolved at the request of the defendants. The latest development could lead to the court imposing sanctions on the SEC, although it is unclear what those sanctions might include.
