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In a court filing last Friday, lawyers for Terra LUNA/USD cofounder Do Kwon asked a judge to dismiss the U.S. Securities and Exchange Commission‘s lawsuit against the disgraced crypto CEO, asserting that the regulatory agency’s accusation of securities fraud was unfounded because the stablecoin at issue is a currency, not a security.
Kwon’s attorneys said U.S. law prohibits regulators “from using federal securities law to assert jurisdiction over the digital assets in this case,” according to Bloomberg.
Kwon was arrested in March for his alleged role in the collapse of the $40 billion Terra ecosystem in May 2022.
In February, the SEC filed a lawsuit against Kwon and his company Terraform Labs, alleging that they had engaged in fraudulent activities. Kwon’s attorneys, however, struck back in Friday’s filing, claiming that the SEC’s “improper assertion of power here by trying to shoehorn all cryptocurrencies into its definition of a ‘security’ fails.”
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According to Kwon’s lawyers, the SEC’s lawsuit is an unsuccessful attempt by the agency to regulate cryptocurrencies using antiquated laws — despite the fact that Congress, the executive branch, and the agency itself can’t agree on what qualifies as a “security,” Bloomberg reported.
In September 2022, a South Korean court issued an arrest warrant against Kwon after investors filed complaints accusing Terraform Labs of defrauding them.
The collapse of LUNA sent the crypto industry reeling through a prolonged bear market that wiped out a massive fraction of the industry’s capitalization.
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