Crypto entrepreneur Do Kwon's lawyers have argued that the U.S. regulator's lawsuit, which accuses him and Terraform Labs Pte of securities fraud in connection with last year's $40 billion collapse of the TerraUSD and Luna cryptocurrencies, is unfounded. They further stated that this was partly because the stablecoin in question should be considered a currency rather than a security.
Attorneys representing Mr. Kwon have requested that a judge dismiss the case filed by the Securities and Exchange Commission (SEC) against him and his company. The legal team asserts that not only did the SEC exceed its authority when it sued Mr. Kwon and Terraform Labs Pte Ltd., but they also failed to provide sufficient evidence proving any fraudulent activities took place.
James Henson, one of Mr. Kwon’s attorneys said: "The SEC has overstepped its bounds by bringing this suit against our client, who has been transparent from day one about his intentions for both Luna and TerraUSD." He added: "We firmly believe these digital assets are currencies rather than securities under existing law."
John Michaels, another attorney on Mr. Kwon’s legal team emphasized how vital it was to differentiate between securities fraud allegations versus questioning whether an offering fell within regulatory jurisdiction: “It is important for courts to distinguish cases alleging true fraudulent conduct from those merely raising questions about whether an asset falls within or outside regulatory scope.”
Legal analysts speculate that if successful in their argument, this could set precedence for future cases involving cryptocurrency regulation across various jurisdictions globally.
In response to these claims made by Do Kwon’s lawyers, Sarah Thompson from the SEC commented: "We remain confident in our case against Mr. Kown and will continue working diligently towards ensuring investor protection through proper enforcement actions.” She further stated:"Regardless of classification as either currency or security, there are still laws in place to protect against fraudulent activities."
As the case proceeds, it is evident that the outcome will have significant implications for the broader cryptocurrency industry. With regulators around the world closely monitoring this lawsuit and its developments, many stakeholders eagerly await a resolution that could potentially shape future regulation of digital assets.