Terraform Labs Co-Founder Do Kwon Argues Against SEC Allegations in Court

By Tsunami On Apr 22, 2023

Terraform Labs co-founder Do Kwon’s legal team argued in court on April 21, against allegations made by the US Securities and Exchange Commission (SEC). Kwon has been sued by the federal agency for allegedly defrauding US investors by illegally offering unregistered securities.

According to Bloomberg reports, Kwon’s lawyers have requested that the judge dismiss the SEC lawsuit, claiming that the regulator’s allegations are baseless. They have argued that US law prohibits regulators from asserting jurisdiction over digital assets in this case.

Moreover, the lawyers have claimed that the SEC failed to prove that Kwon defrauded US investors in connection with the $40 billion collapse of the TerraUSD (UST) and Luna (LUNA) cryptocurrencies. They argued that the stablecoin in question is a currency and not a security.

The legal proceedings against Kwon began on March 23, when he was arrested at Podgorica airport in Montenegro while attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested his extradition.

The outcome of the case remains uncertain as it is still ongoing. However, the arguments made by Kwon’s lawyers have sparked a debate about the classification of stablecoins as currencies or securities.

Stablecoins, unlike other cryptocurrencies such as Bitcoin, are pegged to a fiat currency or commodity, providing price stability. However, the regulatory framework around stablecoins is still evolving, and there is a lack of clarity around their classification.

The case against Kwon could set a precedent for future legal battles involving stablecoins and digital assets. As the popularity of cryptocurrencies and stablecoins grows, regulators will need to provide more clarity on their regulatory framework to protect investors and prevent fraud.

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