In a significant development within the ongoing legal battle involving Terraform Labs and its founder, Do Kwon, Federal Judge Jed Rakoff has approved a motion allowing Jump Crypto to submit certain documents confidentially.
This ruling pertains to the discovery phase of the lawsuit the US Securities and Exchange Commission (SEC) filed against Terraform Labs. However, Judge Rakoff noted that this confidentiality could be revoked if the court later decides any document should be public.
Allegations of Market Manipulation
Central to the case is the accusation against Jump Crypto of manipulating the stablecoin TerraUSD (UST) price, allegedly resulting in a profit of $1.28 billion.
According to the SEC, Terraform Labs loaned large amounts of Terra (LUNA) tokens to Jump Crypto in 2019 and 2020 to improve liquidity. The SEC claims that Jump Crypto continuously sold LUNA, contributing to market instability.
Furthermore, when TerraUSD lost its dollar peg in May 2021, Jump Crypto’s purchase of a large quantity of the stablecoin was allegedly misrepresented as a successful algorithmic re-pegging, misleading investors.
This legal action against Terra and Kwon, initiated in February 2023, follows the collapse of the Terra ecosystem in 2021.
The SEC also accuses Kwon and Terraform Labs of deceiving investors, including making false claims about the use of the Terraform blockchain by the Korean mobile payment processor Chai.
Jury selection for the trial is set for January 29, 2024, in Manhattan unless the case is settled outside of trial through summary judgments requested by both parties. In addition to the civil lawsuit, Do Kwon is serving a prison sentence in Montenegro for document forgery, with a recent decision on his extradition to either the US or South Korea.
The crypto community closely watches the progression of this case, as it may set significant precedents in the regulation and legal treatment of cryptocurrency entities and their executives.
Also Read: SEC Probes Jump Crypto President Over Secret Terraform Deal
