SEC Claims Victory As Do Kwon Fails To Block The Regulator From Accessing Singapore Files

The U.S. Securities and Exchange Commission (SEC) claimed another victory against Terraform Labs co-founder and CEO Do Kwon after the latter failed to prevent the financial regulator from accessing the company's records in Singapore – a major breakthrough for the agency which has filed a case against the embattled crypto executive.

At a hearing last Friday, U.S. District Judge Jed Rakoff denied Do Kwon and Terraform Labs' request to force the SEC to withhold its request for documents currently in possession of the Singapore Monetary Authority (SMA), the country's regulator.

The SEC's request is part of its lawsuit filed in February against Kwon and the blockchain he founded. Both were accused of fraud, selling unregistered securities and unregistered security-based swaps, among other related claims.

The Singapore Monetary Authority, which is the equivalent of the U.S. SEC, has in its possession the files from the defendants of Luna Foundation Guard (LFG) – a cryptocurrency organization designed for the purpose of solely raising money to maintain the TerraUSD (UST) $1 peg, court records showed.

So far, it is not clear what records the SEC would like to get from Singapore, but it could help the financial regulator in its case since the blockchain firm that Kwon co-founded was based in the island country.

Several months following the spectacular crash of Terra's so-called algorithmic stablecoin TerraUSD (UST) and its native token LUNA, the SEC announced that it has charged Kwon and TFL with "orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities."

The regulator also alleged that "Terraform and Kwon also misled investors about one of the most important aspects of Terraform's offering – the stability of UST, the algorithmic 'stablecoin' purportedly pegged to the U.S. dollar."

Moreover, the SEC claimed that "almost immediately upon UST's recovery in May 2021, Terraform and Kwon began to make materially misleading statements about how UST's peg to the dollar was restored."

It further noted that "Terraform and Kwon emphasized the purported effectiveness of the algorithm underlying UST in maintaining UST pegged to the dollar – misleadingly omitting the true cause of UST's re-peg: the deliberate intervention by the U.S. Trading Firm to restore the peg."

In March, the Singapore police force confirmed that they started investigating Terraform Labs.

Kwon is currently detained in Montenegro after authorities foiled his plan to leave the country for Dubai using fake travel documents.

The crypto executive could face prison time in Montenegro if proven guilty of his alleged crime. Both the U.S. and South Korea have already requested Kwon's extradition.