Lawyers defending Terraform Labs co-founder Do Hyeong Kwon, also known as Do Kwon, have presented their argument that the United States Securities and Exchange Commission (SEC) has no jurisdiction over the matter . The legal team says that US law prevents regulators “from using federal securities law to assert jurisdiction over digital assets in this instance.”
Terraform Labs co-founder’s legal team says SEC lacks jurisdiction over digital assets in Terra case
According to Bloomberg, Kwon’s attorneys have filed a motion to dismiss the lawsuit, citing that the SEC’s case rests on outdated regulations and that the agency’s definition of digital assets as securities is far from clear. In fact, Patrick McHenry (R-NC), the chairman of the House Financial Services Committee, recently said there was “a great deal of uncertainty” regarding the SEC’s enforcement actions. Kwon’s lawyers are capitalizing on this ambiguity to argue that the SEC’s attempt to categorize all cryptocurrencies as securities fails.
Kwon’s lawyers said:
The SEC’s inappropriate assertion of power here in trying to fit all cryptocurrencies into its definition of a “security” fails.
Kwon is facing charges from the SEC for leading “a multi-billion dollar crypto-asset securities fraud” filed in mid-February 2023. The SEC alleged that the stablecoin terrausd (UST) and Terra’s LUNA token were “unregistered securities” and that Kwon had created a suite of mirrored assets that replicated the value of US stocks, which were used on the now-defunct Mirror defi platform.
This lawsuit is not the first time that Kwon and the SEC have crossed paths. The SEC had previously served Kwon with a 2021 subpoena over the Mirror protocol, and Kwon had sued the SEC for his lack of jurisdiction. In November 2021, the SEC attempted to compel Kwon with subpoenas, requesting documents from Terraform Labs. Six months later, the former stablecoin UST disintegrated, leading to the colossal collapse of the Terra blockchain ecosystem.
Kwon is currently being held in Montenegro after his March 23 arrest for possession of false identity documents. He is at risk of extradition by law enforcement officials from the United States and South Korea due to the collapse of the Terra ecosystem and transactions involving his native assets, UST and LUNA. According to a recent report, Kwon had paid $7 million to a top law firm in South Korea before the Terra ecosystem collapsed.
What do you think will be the outcome of the legal battle between Do Kwon and the SEC? Share your thoughts on this topic in the comments section below.
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