Former SEC Branch Chief Explains Why U.S. Has Jurisdiction in Do Kwon Case

U.S. law enforcement has jurisdiction over Singapore-based Terraform Labs and its founder Do Kwon because they knowingly marketed their LUNA and terraUSD (UST) coins to U.S. investors, said Lisa Braganca, a former enforcement branch chief at the U.S. Securities and Exchange Commission.

“[The SEC’s] contention is that Do Kwon and these folks were reaching out to U.S. investors, whether they were based in the U.S. or not,” Braganca told CoinDesk TV’s “First Mover” on Friday. “They were getting U.S. investment money, and frankly, they were targeting their pitch to U.S. investors.”

In February, the SEC brought civil charges against Kwon for defrauding investors in what the agency said was a multibillion-dollar scheme involving the platform’s algorithmic stablecoin, as well as the sale of other crypto asset securities.

On Thursday, Kwon was arrested at the airport in Montenegro’s capital city of Podgorica, according to a tweet from Filip Adzic, the country’s interior minister. Hours after Kwon’s arrest, New York federal prosecutors filed criminal charges against Kwon for fraud. On Friday, Kwon was charged with forgery and is set to appear in court as he faces extradition proceedings.

Braganca said the SEC is bringing charges against Kwon and those who worked with him because he allegedly misled investors about how the UST stablecoin was backed.

“LUNA and Terraform [Labs] were not stable as they were supposed to be,” she said. The UST token was intended to maintain a peg to the U.S. dollar, while LUNA, its companion token, was intended to stabilize UST’s price.

“The algorithm that Do Kwon said was in place was supposed to cause them [LUNA/UST] to come back into balance and be stablecoins,” Braganca said.

But instead, Braganca claimed, Kwon “went to a third party to get a big buy to prop it [LUNA/UST] up,” and is alleged to have engaged in market manipulation. She said that “more sophisticated institutional investors” also lost billions of dollars with the collapse of Terra.

Mark Califano, a U.S. lawyer for Kwon, didn’t immediately respond to a request for comment.

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