Terra’s Do Kwon Fights Back: Urges SEC to Drop Charges, Court Documents Reveal

"Founder of Terraform Labs, Do Kwon, seeks dismissal of SEC charges citing lack of jurisdiction"

Lawyers representing Do Kwon, the founder of Terraform Labs, a collapsed crypto issuer, have requested a U.S. court to dismiss the charges brought against him by the Securities and Exchange Commission (SEC), according to court filings from Friday. The filings indicate that Kwon, a South Korean national, has been on the run since May 2022, following the collapse of his multi-billion dollar crypto enterprise. He was recently arrested in Montenegro for attempting to travel with falsified documents. The SEC subsequently charged him with securities fraud. Kwon’s representatives have argued that the SEC has not proved “personal jurisdiction” as the products referenced by the SEC were “available to the world and not directed at U.S. persons”. They have also claimed that the stablecoin UST, which is involved in the case, does not fall under the purview of the SEC, as it is a currency and not a security. A 47-page supporting document for a motion to dismiss the charges has been filed with a New York court. The company did not conduct any public offerings of securities that warranted an SEC registration, according to Kwon’s representatives. The SEC can oppose the motion to dismiss by May 12.

The SEC’s Chief, Gary Gensler, has been facing mounting criticism over his handling of crypto regulation, mainly through enforcement action.

The case against Kwon has been closely watched by the crypto industry, with many believing that it could set a precedent for future SEC enforcement actions. Kwon’s lawyers have argued that the SEC does not have jurisdiction over their client, as the products he offered were not directed at U.S. persons. They have also claimed that the stablecoin UST does not fall under the purview of the SEC, as it is a currency and not a security.

The SEC has been increasingly active in the crypto space, with Gensler taking a tough stance on regulation. However, some have criticized his approach as being too heavy-handed, with little consideration given to the unique nature of the crypto industry.

Kwon’s case is just one of many that the SEC has brought against crypto companies and individuals in recent years. While some have resulted in significant fines and penalties, others have been dismissed due to lack of evidence or jurisdiction. It remains to be seen how Kwon’s case will play out, but it is clear that the SEC is taking a hard line on crypto regulation, and that those who operate in the space need to be aware of the potential risks and consequences.

The crypto industry has grown rapidly in recent years, with billions of dollars invested in various projects and companies. While many see it as a promising new asset class, others remain skeptical, citing concerns over volatility, security, and regulation. As the industry continues to evolve, it is likely that we will see more cases like Kwon’s, as regulators seek to establish clearer guidelines and boundaries for those operating in the space.

Martin Reid

Martin Reid

Leave a Replay

Scroll to Top