The extradition of Terraform Labs founder Do Kwon was revoked by the Appellate Court of Montenegro today after a successful appeal, sending him back to court where he will undergo a retrial.

On December 29 last year, the Podgorica High Court ruled that the legal requirements were fulfilled to extradite Kwon so that he could be prosecuted by either South Korea or the United States.

However, a translated press release shows that the appeals court has vetoed the High Court’s ruling due to “significant violations of the provisions of criminal procedure.”

As a result, the court has “returned the case to the court for retrial and decision,” pointing out that “the wording of the decision is incomprehensible, the decision has no reason for decisive facts, and the reasons given are unclear.”

Read more: Do Kwon granted extradition, but to US or South Korea?

Kwon successfully appealed his extradition on December 19. However, the High Court ruled against this on the 29, leading to this further successful appeal from Kwon’s legal team.

According to today’s announcement, the High Court failed to account for specific procedures regarding who has the authority to decide on a shortened extradition. In addition, the High Court “did not determine in an unquestionable manner” the order in which South Korea and the US petitioned for Kwon’s extradition. 

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Terra founder Do Kwon has lost his appeal against a four-month prison sentence with a Montenegro High Court rejecting his claims and describing them as “unfounded.”

In a statement issued today, the Podgorica Higher Court rejected Kwon’s appeal against a lower court judgment. It said that the Podgorica Basic Court had “correctly and completely established the factual situation,” “correctly applied the Criminal Code of Montenegro,” and “determined and evaluated all the circumstances that influence the choice of criminal sanction and its amount.”

Do Kwon had attempted to appeal a prison sentence after he and Terra executive Han Chang-Joon were found guilty of falsifying documents. The pair have remained in custody in Montenegro since their arrest in March and are awaiting extradition to either the US or South Korea.

Read more: South Korea lead prosecutor says Do Kwon likely to spend most of life in prison

Do Kwon has previously fought attempts from the US Securities and Exchange Commission (SEC) to extradite him. In contrast, the SEC has requested that Kwon should forgo a jury if he is ever tried, as the SEC argues his alleged fraud and sale of securities is “clear, undisputed, and overwhelming.”

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Recently unsealed documents reveal that Jump Crypto president Kanav Kariya pled the Fifth when asked about an alleged backdoor bribe made with Terraform Labs founder Do Kwon back in 2021, in an attempt to re-peg stablecoin TerraUSD (UST).

According to the SEC, Kariya and now-imprisoned Kwon agreed in May 2021 that Jump Crypto would manipulate the price of UST in exchange for amendments to the terms of Jump’s LUNA loan agreement. In February, sources familiar with the case told reporters that Jump Crypto made $1.28 billion dollars in profit from Kwon’s now-decimated crypto empire.

“And when you asked Do Kwon to lift the vesting conditions in exchange for Jump’s agreement to buy up UST to restore the peg, Do Kwon agreed to that, correct?” SEC counsel Devon Staren asked Kariya in court on August 18.

“On the instruction of counsel I exercise my rights under the Fifth Amendment and decline to answer the question at this time,” Kariya replied (via Blockworks). The Jump Crypto president pled the Fifth a total of nine times, according to his recently unsealed deposition.

Read more: Jump Crypto profited from Terra Luna as investors lost billions

The SEC’s ongoing case against Kwon and Terraform Labs alleges that they violated securities laws and defrauded investors. Both the SEC and the defense have filed for summary judgement — while Kwon’s lawyers believe the case should forego a trial by jury because the SEC has failed to prove its clients broke the law, the commission has asked for swift judgement because the alleged fraud and sale of securities is “clear, undisputed, and overwhelming.”

Kariya was deposed at the end of August for his alleged involvement. Kwon was a fugitive until his arrest in Montenegro, where he is currently serving time in prison after local courts found him guilty of document forgery. He awaits extradition.

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The Securities and Exchange Commission (SEC) has asked a federal judge for a summary judgement in its case against Terraform Labs founder Do Kwon, arguing that his alleged fraud and sale of securities is “clear, undisputed, and overwhelming.”

Granting summary judgement means that the case forgoes a trial by jury. A few days ago, Kwon’s lawyers requested the same motion — but asked the judge to take their side instead. The defense argued that the SEC hasn’t adequately proved that Terraform Labs was selling securities.

As readers recall, the firm’s ‘stablecoin’ TerraUSD (UST) spectacularly depegged last year. Its native token LUNA crashed soon after, causing a domino effect on the crypto market that it has yet to recover from.

Read more: Swiss police freeze millions of Do Kwon, TFL assets at request of SEC

In the SEC’s motion filed on Thursday, Kwon and his company are accused of orchestrating a fraudulent scheme that “ultimately led to $45 billion in market loss, including devastating losses for US investors.” Lawyers wrote that Kwon offered and sold “an array of crypto asset securities” and knowingly deceived investors about the stability of these securities and TerraUSD.

Kwon himself is still in Montenegro, serving a sentence for document forgery while awaiting extradition.

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Terraform Labs founder Do Kwon has asked a US court to deny the Securities and Exchange Commission’s (SEC) request to question him in the US before mid-October on account of him still being detained in Montenegro.

Kwon’s legal team claimed in a filing that the SEC’s request to grill him over the collapse of the Terra ecosystem is “impossible,” pointing to the fact that he still has no definite release date or scheduled extradition.

They also object to the idea of Kwon being asked to provide a written testimony, branding it “inconsistent with his right to due process under the United States Constitution.”

Read more: Explained: SEC allegations against Do Kwon and Terraform Labs

Kwon has, however, thrown the SEC a lifeline, stating that he’s not entirely opposed to the idea of a deposition — provided it takes place in Montenegro. This would involve a Montenegrin court asking questions on the SEC’s behalf.

According to Kwon’s lawyers, “… the SEC’s brief says nothing about the location of the deposition, which was the only point of dispute between the parties.”

The filing adds, “… the SEC asks the Court to grant it leave to take the deposition of a person “confined in prison,” omitting that it intends to notice the deposition to occur over 4,500 miles away from the jail in which Mr. Kwon is detained by a foreign sovereign.

However, despite this seeming compromise, the SEC says that such an arrangement may be “inadequate” and says it may seek another deposition in the US after the discovery cut-off period.

The SEC alleges that Terraform Labs and Kwon defrauded investors in a scheme involving multiple unregistered securities. It also points toward Kwon and Terraform’s efforts to create, advertise, and maintain the unsustainable lending protocol Anchor.

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Judge Rakoff in the Southern District of New York has denied a motion to dismiss by Terraform Labs in its ongoing case with the Securities and Exchange Commission (SEC), and in the process has diverged from a ruling recently handed down in the SEC case against Ripple. 

This case in no way overturns the decision by Judge Torres in the Ripple case, which distinguished between different types of sales, although the SEC may still appeal.

Judge Rakoff does make clear in this Terraform ruling that “the Court declines to draw a distinction between these coins based on their manner of sale, such that coins sold directly to institutional investors are considered securities and those sold through secondary market transactions to retail investors are not.

In doing so, the court rejects the approach recently adopted by another judge of this District in a similar case, SEC v. Ripple Labs Inc.” 

Read more: Here’s why Ripple XRP partnerships and MoUs often go nowhere

The Terraform and Ripple cases do potentially differ on certain representations made by the defendants, with Judge Rakoff making clear that their decision was in part motivated by the fact that all value derived from sales of Luna, as represented by the defendants, “would be fed back into the Terraform blockchain and would generate additional profits for all crypto-asset holders.”

Cryptocurrency companies in the US still await regulatory clarity as these cases make their way through the courts and negotiations in Congress continue to get bogged down. 

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Approximately $26 million in bitcoin and crypto assets belonging to Terraform Labs executives, including founder Do Kwon, have reportedly been frozen by authorities in Switzerland.

South Korean news outlet Digital Asset reported that the funds were taken from Zurich-based digital asset bank Sygnum at the request of US federal prosecutors and the Securities and Exchange Commission (SEC).

Sygnum made headlines back in 2017 when it announced it was the world’s first regulated digital asset bank. In February this year, the SEC said that 10,000 bitcoins were transferred from Terraform Labs and the Luna Foundation Guard (LFG) to personal wallets belonging to top execs.

“Since May 2022, defendants have sent the bitcoins in this wallet to Swiss financial institutions and turned it into fiat currency, withdrawing more than $100 million by the time of filing the lawsuit,” the SEC said.

In April this year, Digital Asset reported that the Seoul Southern District Prosecutors’ Office’s Financial Securities Crime Joint Investigation Division tracked down $100 million of bitcoin owned by LFG that had been converted into cash and deposited to Sygnum accounts.

Prosecutors in both the US and South Korea then requested that Sygnum freeze the assets. In response, Sygnum told Finbold in April that it had previously transferred “more than 70% of the Bitcoin-sale fiat proceeds into the escrow account of an international and to other reputable law firms.”

Indeed, Protos reported earlier that month that South Korean prosecutors accused Kwon of sending millions to a prominent law firm in the country right before the Terra/Luna ecosystem collapsed — suggesting the founder knew things were going awry.

Read more: Do Kwon registered company in Serbia weeks after Interpol arrest warrant

Along with Kwon, the recently frozen crypto assets are said to belong to former head of research at Terraform Labs, Nicholas Platias, and former Chai Corporation chief Han Chang-joon.

The latter was arrested with Kwon in Montenegro attempting to flee to Dubai. Last week, both were sentenced to four months in prison for document forgery.

The US and South Korea are both battling for Kwon to be extradited in order to face charges of fraud. According to the lead South Korean prosecutor working on the disgraced crypto founder’s case, Kwon will spend most of the rest of his life behind bars.

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Chicago-based trading firm Jump Trading has been accused of manipulating the price of algorithmic ‘stablecoin’ TerraUSD (UST) a year before it collapsed, in a class action lawsuit filed on May 9 — echoing ongoing investigations by New York federal prosecutors and suspicions from the Securities and Exchange Commission (SEC).

The suit alleges Jump Trading and its chief exec Kanav Kariya committed violations of the Commodity Exchange Act and other CFTC rules, as well as unjust enrichment common law.

Jump Trading allegedly entered into a secret agreement with Terraform Labs (TFL) co-founder Do Kwon to manipulate the price of UST between May 23 and 27, 2021. Kwon told investors the loan would help prop up liquidity amid concerns over its “lackluster” performance.

The suit further alleges that, in exchange, Jump Trading received more than 61.4 million LUNA tokens at a greater than 99% discount from its then-current market price, which Jump later resold at a $1.28 billion profit. At one point, Jump could allegedly buy LUNA tokens for $0.40 apiece when it was trading for $90 on the open market. 

Jump Trading manipulation suspected by SEC and NY prosecutors

This recent lawsuit echoes concerns held by top US regulators. In a lawsuit against Kwon, the SEC suspected that a secretive trading firm, probably Jump Trading, had previously rescued UST’s peg in May 2021, when it briefly dropped below $1 and curiously recovered its peg a few days later.

Unnamed sources at the SEC alleged that Jump Trading earned over $1.2 billion in profit from selling the discounted LUNA it privately received from Kwon and Terraform Labs at various discounts — a figure repeated in Kim’s lawsuit.

Moreover, New York prosecutors have been investigating whether Jump Trading manipulated UST. This investigation includes examining messages on Telegram sent between employees.

Jump Trading and Terraform Labs allegedly attempted to conceal their collusion, but couldn’t hide the fact that Jump Crypto co-founder Kanav Kariya once held a seat on the Luna Guard Foundation’s (LGF) governing council. LGF incomprehensibly transferred 52,000 bitcoin to Jump Trading during its supposed efforts to rescue Terra’s peg. Those bitcoin seemed to disappear into a wormhole shortly afterward.

Read more: Jump Crypto profited from Terra Luna as investors lost billions

Latest lawsuit suggests stablecoins are commodities

Interestingly, head plaintiff Taewoo Kim is suing the multi-billion dollar parent company of Jump Crypto, Jump Trading. A victory against that fabulously profitable parent company would certainly be advantageous from a collections standpoint.

Although the lawsuit briefly mentions the SEC’s actions against UST and its backers, it proposes that stablecoins like UST might be commodities. It cites a CFTC case in which it reached a settlement with Tether and Bitfinex over USDT backing claims. Similarly, UST wasn’t fully reserved and couldn’t withstand its crisis of confidence.

Jump is a decabillion-dollar institution in Chicago. Although it has operated market-making and quantitative trading operations for decades, it only recently began proprietary crypto trading after the ICO boom of 2017.

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Terraform Labs co-founder Daniel Shin has been indicted in South Korea, along with nine others involved in the project, on several charges including violations of capital markets law, Bloomberg reports.

Eight people, including Shin, have been indicted for illegal trading; two others are indicted for breach of trust. According to the Seoul Southern District Prosecutors’ Office in a press briefing on Tuesday, the 10 people indicted are all directly linked to the Terra Luna project in several ways, including marketing and systems development and management.

So far, prosecutors have frozen a combined 247 billion won ($185 million).

The indictment comes hot on the heels of a recent district court decision that dismissed securities violations charges against Shin because Terraform Labs’ native cryptocurrency, Luna, was not a security. However, this recent indictment suggests otherwise.

Read more: Will arrested Terra founder Do Kwon be extradited to the US or South Korea?

According to Shin’s lawyer Kim Ji-dong, the co-founder has “nothing to do with the … collapse as he left the company two years before the fallout.

“He voluntarily returned to South Korea immediately after the collapse, and has been faithfully cooperating with the probe for over 10 months, hoping to contribute to fact finding,” (via CoinDesk).

Terraform Labs’ other co-founder Do Kwon was indicted in Montenegro last week following an arrest for document forgery.

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Security violations charges against Terraform Labs co-founder Daniel Shin have been dismissed by a South Korean district court, which further deemed that the firm’s native token luna was not a security.

This latest ruling is markedly decisive compared to previous court discussions. “It is difficult to see Luna Coin as a financial investment product regulated by the Capital Markets Act,” a translation of the court ruling reads. Previous court hearings regarding luna have shown authorities on the fence, stating that there was room for debate in the law, and “it is questionable whether the Capital Market Act can be applied.”

The decision that Shin didn’t violate securities law came as a response to an appeal filed by prosecutors to not dismiss an arrest warrant and confiscation of property for Shin. Co-founder Do Kwon is currently detained in Montenegro on charges of document forgery. South Korean authorities are looking to extradite Kwon — but the US is also battling for its own extradition.

Read more: Do Kwon sent law firm millions of dollars before Terra crash

Shin’s lawyer said, “The court rejected all of the prosecution’s 10 or so requests for arrest warrants against former CEO Shin and others involved in this case, consistently ruling that there is room for dispute on whether or not the Capital Markets Act was established.

“It can be seen that the court judges that it is difficult to view luna as a financial investment product.”

The implications of the South Korean court’s decision mean that, moving forward, prosecutors must argue that the pair are guilty of fraud and breach of trust rather than violating the country’s Capital Markets Act. 

However, the US Securities and Exchange Commission (SEC) has charged Terraform Labs and Kwon for violating national securities law. As noted by attorney Koo Tae-eon, however, “This is not the judgement of the US judiciary, but the SEC’s argument,” and therefore is still subject to dispute in court.

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