Do Kwon Lawyers Reject SEC Securities Fraud Allegation, Claims Agency Uses Outdated Laws to Regulate Cryptocurrencies

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April 23, 2023 4:00 p.m. | 1 minute read

In a court filing last Friday, attorneys for Terra (CRYPTO:LUNA) co-founder Do Kwo asked the judge to dismiss the U.S. Securities and Exchange Commission’s lawsuit against the disgraced crypto CEO, claiming that the securities fraud accusation by the regulatory agency was unfounded because the stablecoin in question is a currency, not a security.

Kwon’s attorney said U.S. law prohibits regulators “from using federal securities law to assert jurisdiction over digital assets in this matter,” according to Bloomberg.

Kwon was arrested in March for his alleged role in the collapse of the $40 billion Terra ecosystem in May 2022.

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In February, the SEC filed a lawsuit against Kwon and his company Terraform Labs, alleging they had engaged in fraudulent activity. Kwon’s attorneys, however, fired back in Friday’s filing, saying the SEC’s “incorrect assertion of power here in trying to fit all cryptocurrencies into its definition of ‘security’ fails.”

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According to Kwon’s lawyers, the SEC lawsuit is a failed attempt by the agency to regulate cryptocurrencies using outdated laws despite the fact that Congress, the executive branch, and the agency itself cannot agree on what qualifies as “security,” Bloomberg reported.

In September 2022, a South Korean court issued an arrest warrant for Kwon after investors filed complaints accusing Terraform Labs of defrauding them.

The collapse of LUNA sent the crypto industry reeling from a prolonged bear market that wiped out a massive fraction of the industry’s capitalization.

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