Lawyers for Do Kwon, the founder of Terraform Labs tied to the multibillion-dollar collapse of the Terra ecosystem, want a federal court to deny a request from the U.S. Securities and Exchange Commission (SEC) to question Kwon in the United States.
The legal team highlighted that Kwon has been in custody in Montenegro since March and doesn’t have a scheduled release or extradition date, according to a new court document filed on Wednesday.
The SEC sued Singapore-based Terraform Labs and Do Kwon in February for allegedly misleading investors about the safety of purchasing the high-yield TerraUSD stablecoin, which kept its peg through a symbiotic relationship with sister coin Luna. Both coins collapsed in May 2022, leaving a multi-billion dollar dent in the crypto industry.
However, Kwon’s legal team is only pushing back against the SEC on geographic concerns, according to the new document filed with the U.S. District Court for the Southern District of New York.
The defense team noted that Kwon had already agreed to answer SEC-requested questions in Montenegro, but the regulator still wanted to leave open the option of deposing Kwon in the U.S. before the Oct. 13 discovery deadline.
“[T]he SEC seeks to have its cake and eat it too by simultaneously (1) permitting the Montenegrin Court to question Mr. Kwon under the LOR requested by the SEC, (2) reserving the right to disregard Mr. Kwon’s answers if it does not like them, and (3) seeking leave from this Court to take Mr. Kwon’s deposition in the United States while he is detained in Montenegro,” wrote the lawyers, referring to the letter of request (LOR) previously sent by the SEC.
The SEC might be operating with a skeletal staff in October if Congress doesn’t pass required funding legislation before government spending runs out Oct. 1. Speaking to the U.S. House Financial Services Committee on Wednesday, SEC Chair Gary Gensler said that 92% to 93% of the agency would be furloughed during a shutdown, severely limiting operations.