The legal team of Terraform Labs Co-founder and CEO Do Kwon have filed a motion to the United States Securities and Exchange Commission (SEC) to dismiss the charges against Kwon and other executives, claiming that Terra coins are not securities. This marks the latest development in the ongoing legal battle, with South Korean prosecutors also hoping to bring Kwon to trial on similar charges.
Kwon’s lawyers claim that Terra stablecoins are “currencies,” which means the SEC has no jurisdiction over Terraform. According to South Korean media outlet EDaily and Bloomberg, Kwon’s lawyers state that the SEC charges against Terraform, Kwon, and other executives are baseless. Legal experts in Korea believe it will be hard for the prosecution to bring charges against Kwon, as South Korean law does not currently classify any cryptoassets as securities.
The SEC has accused Kwon and others of knowingly trading unregistered securities, which Kwon’s lawyers claim is a baseless accusation. They also state that the SEC was powerless to “use federal securities law to assert jurisdiction over the digital assets in this case,” and have asked an American court to dismiss the lawsuit. The lawyers claim that the SEC is making use of “outdated regulations,” referring to American securities laws dating back to the early 1930s.
Many crypto advocates in the United States have previously called for crypto to be excluded from SEC jurisdiction, but the SEC has pushed back, with Chairman Gary Gensler indicating that many popular tokens may indeed be securities.
Kwon’s lawyers also complain that the SEC’s classification of cryptoassets as securities is unclear. They state that the SEC’s attempt to regulate cryptocurrencies using outdated laws is inappropriate, and that the SEC’s assertion of power “by trying to shoehorn all cryptocurrencies into its definition of a ‘security’ fails.”
Earlier this month, prosecutors in South Korea moved to freeze more of Kwon’s crypto and fiat holdings, and the legal situation for Kwon is far from clear. He is currently in Montenegro, where he was last week charged with forgery-related offenses by local authorities. Local media outlets say that Kwon will appear in court on May 11. Kwon is also wanted in Singapore, where Terraform was established in 2018.
Last week, media outlets discovered that Kwon had paid Kim & Chang, South Korea’s biggest law firm, some $7 million just before the collapse of Terra coins in May last year. Kwon also shuttered his South Korean businesses and left the nation prior to the collapse.
As the legal battle between Do Kwon and the SEC continues, it remains to be seen what will happen next. If Kwon’s legal team is successful in dismissing the charges against him, it could mean a significant victory for the crypto industry and pave the way for clearer regulations around cryptocurrency. However, if the SEC wins the case, it could set a precedent for classifying crypto as securities and tighten regulations around the industry.
