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

Lisa Braganca believes that the crypto entrepreneur knowingly pitched investments in the UST and LUNA tokens to Americans.

AccessTimeIconMar 24, 2023 at 5:35 p.m. UTC
Updated Mar 24, 2023 at 7:07 p.m. UTC

U.S. law enforcement would have jurisdiction over Singapore-based Terraform Labs and its founder Do Kwon if they knowingly marketed their LUNA and terraUSD (UST) stablecoins to U.S. investors, which Lisa Braganca, a former enforcement branch chief at the U.S. Securities and Exchange Commission, believes to be the case.

“[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," she said.

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.

South Korean authorities issued a warrant for Kwon's arrest on charges of fraud last September, four months after the UST stablecoin and its sister stablecoin LUNA lost most of their value. Kwon is a South Korean national.

On CoinDesk TV, 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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Fran Velasquez

Fran is CoinDesk's TV writer and reporter.