by Matthew Russell Lee, Patreon Book Substack
SDNY COURTHOUSE, Nov 30 – The SEC's case against Terraform Labs is moving toward a January 2024 trial. That is, unless summary judgment is granted - arguments were held on November 30, see thread and below. On November 17 US District Court for the Southern District of New York Judge Jed S. Rakoff held a hearing on potential trial experts. Inner City Press live tweet, thread.
Five days later, Judge Rakoff barred defense experts Unny and Parlour - and in Montenegro, the Basic Court in Podgorica approved the extradition of Terra founder Do Kwon, with the destination of the extradition to be made by the Montenegrin justice minister after Kwon serves out his four-month prison sentence in Montenegro for document forgery.
On November 30, there were summary judgment motion arguments. Inner City Press was there and live tweeted, thread:
All rise! Judge Rakoff: We have an hour, at 4:30 I must attend training of our newly confirmed judge. First, we must address Mr Unny's submission - at the Daubert hearing, I struck Mr Unny as an expert...
Judge: So it seems like an unauthorized submission. But I will consider it on summary judgment. SEC lawyer: Do Kwon and Terra committed fraud with Luna, with fake transactions
Judge: How can intent be a matter of summary judgment? SEC lawyer: Do Kwon said, We are not using the Terra blockchain.
SEC lawyer: On the de-peg, Kwon said he was speaking to Jump, to deploy $100 million to buy up UST. The lied that the algorith had healed itself. The defendants have no evidence, and they don't contest ours. We have whistleblowers [now sealed?]
SEC lawyer: They point to a Chai merchant agreement - but it says "IF Terra's services are integrated" - if. Do Kwon lied on Medium.SEC lawyer: With respect to Howey, there is no issue --
Judge: A swap has a definition, how does this qualify? If the holder bears all the risk? SEC lawyer: The minter bears risk. Judge: Let me hear from your adversary. Terra/Do lawyer: The SEC bears the burden
Judge: I understand you don't agree with my interpretation of Howey, but I decided that on the motion to dismiss. Terra/Do lawyer: We disagree that the motion to dismiss could decide that. Judge: How can there not be summary judgment on unregistered securities?
Terra/Do lawyer: There are still the exceptions. Judge: That's mostly legal issues, but perhaps not entirely... WHat about fraudulent intent? Terra/Do lawyer: This is the reverse of a 10(b) case. There are factual disputes about Jump
Terra/Do lawyer: There were factual disputes even in the "Dawbert" hearing- Judge Rakoff: Mr Daubert pronounces it DOWbert, the Brooklyn pronunciation [Quiet laughter in the courtroom]
2d Terra / Do lawyer: The SEC has misrepresented Do Kwon's statements. The whistleblower whose name we are not supposed to say, he withheld some of his recordings.
2d Terra/Do lawyer: The discussion between Do and Chin was noy about Chai. There was Project Santa. A bit more- Judge: Quickly. 2d Terra/ Do lawyer: The engineer said he thought settling was occurring through the LP server
2d Terra/ Do lawyer: The affiant has been caught lying. And Dr Edmonds has admitted he doesn't know how it works. Judge: Rebuttal? Terra/Do lawyer: Can we have a minute of that on our motion? Judge: You can have 2 minutes. [Smiles] SEC lawyer: Do lied on Discord
SEC lawyer: Paul Kim of Terraform had made admissions... The transactions were in fiat, not on the blockchain. Judge: OK, final rebuttal. Terra/Do lawyer: The SEC is flipflopping on the de-peg Judge: But maybe they're right on the law.
Judge: If this case goes to trial, nothing is going to stay confidential. Judge: Adjourned.
More (Nov 30) on Substack here
On November 27, Judge Rakoff ordered whistleblowers' identity and information taken off, among other platforms, CourtListener: "v***SELECTED PARTIES*** ORDER: The Court respectfully directs the Clerk to modify the viewing level to Selected Parties for the documents numbered 103-24 and 103-59 on the docket of this case, so that only attorneys who have entered an appearance in the case for the SEC, Do Hyeong Kwon, or Terraform Labs PTE Ltd. may view these two documents. The Court further directs that unredacted versions of these documents be removed from third party reporting services, including Lexis CourtLink and CourtListener. The Court puts the parties on notice, however, that should this case proceed to trial, the Court will revisit the issue of whether whistleblower names may remain confidential. (Signed by Judge Jed S. Rakoff on 11/27/2023)." We aim to have more on this.
The SDNY criminal case is US v. Kwon, 23-cr-151 (Cronan)
More on Substack here
The case is Securities and Exchange Commission v. Terraform Labs Pte Ltd. et al., 23-cv-1346 (Rakoff)
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