Terra Co-Founder’s Lawyers Dismiss SEC’s Securities Fraud Allegation

Do Kwon’s lawyers have reportedly argued in court against the allegations pressed by the US Securities and Exchange Commission (SEC), who had sued Kwon for allegedly defrauding US investors by illegally offering unregistered securities.

However, Kwon’s lawyers have asked the judge to dismiss the SEC lawsuit on the grounds that the federal agency’s allegations were unfounded.

According to them, US law prohibits regulators from using federal securities law to assert jurisdiction over digital assets in this case.

The legal proceedings started when Do Kwon was arrested at Podgorica airport, Montenegro on March 23, while attempting to fly to Dubai using fake documents.

Following his arrest, both South Korean and American authorities requested the entrepreneur’s extradition. It remains unclear as to which country, if any, would be the most likely to be granted the extradition of Kwon.

The SEC alleged that Kwon had defrauded US investors in connection with Terra’s $40 billion collapse of the TerraUSD (UST) and Luna (LUNA) cryptocurrencies.

However, Kwon’s lawyers claimed that the stablecoin at issue is a currency, not a security, and the SEC had failed to prove that Kwon had defrauded US investors.

Recently, the Seoul Southern District Court denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong, who prosecutors had sought to arrest following Kwon’s arrest. The court denied the request while citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence.