In a bid to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC), top law firm Dentons, representing Terraform Labs and co-founder Do Kwon, has submitted additional documents to the court. The primary focus of the hearing on Thursday was to determine if digital assets developed by Terraform Labs should be classified as securities under an “investment contract.”
The legal teams of Terraform Labs and co-founder Do Kwon, along with the SEC, filed their responses to the motion to dismiss the lawsuit in the US District Court for the Southern District of New York on June 15. Dentons argues that the algorithmic stablecoin UST (now USTC) is not a security, as it is designed for practical use rather than an investment contract. To support their case, the law firm provided supplementary documents, which include the US House Financial Services Committee hearing on digital asset regulation and stablecoin issuance, the SEC request for a restraining order against Binance.US, and Hinman emails in the SEC v. Ripple lawsuit.
The lawyers highlighted the “regulatory gap” in defining crypto assets as securities, as the US Congress is still working on developing regulatory frameworks for digital assets and stablecoin issuance. They further claimed that the SEC is overreaching its jurisdiction regarding securities laws and utilizing internal emails discussing “investment contracts” to pinpoint a security.
However, the SEC posits that the additional documents submitted by the defendants do not support their motion to dismiss the lawsuit. Moreover, the Binance.US transcript and internal SEC emails are deemed irrelevant in this case. The SEC maintains that the Howey Test does clearly define an “investment contract,” and UST should be classified as a security. Judge Jed Rakoff announced that he will deliver his ruling on the motion to dismiss by July 14.
In a related development, a South Korean court decided in April that Terra Classic (LUNC) is not a security, and Terra crypto assets do not qualify as “investment contracts.” Dentons has previously represented Do Kwon in other cases, including challenging the US SEC subpoena during its investigation of Mirror Protocol in 2021 and a class-action lawsuit in the Singapore High Court in 2022.
As the legal battle continues, the Montenegro High Court has granted bail for Do Kwon and former CTO Han Chang-joon. Nevertheless, both parties will remain detained, as the High Court judge has ordered their extradition to South Korea. The investigation into Do Kwon’s political connections with Montenegro’s former Finance Minister Milojko Spajic is also ongoing.
Source: Coingape
