Do Kwon, founder of Terraform Labs, has requested a dismissal of charges filed against him by the Securities and Exchange Commission (SEC) for securities fraud. Kwon’s legal team is alleging that the SEC does not have regulatory jurisdiction over the case, and is questioning whether the UST stablecoin is a security.
Kwon’s crypto enterprise collapsed in May 2022, and he has since been on the run from regulators. He was recently arrested in Montenegro for attempting to travel with falsified documents. The SEC has accused Kwon of securities fraud, and the case is part of a larger crackdown on crypto fraud and abuse by the SEC under the leadership of Gary Gensler.
Kwon’s defense team has filed a motion to dismiss the charges, citing a lack of personal jurisdiction and regulatory power on the part of the SEC. According to court filings, the products referenced by the regulator were “available to the world and not directed at U.S. persons.” Additionally, Kwon’s legal team claims that the UST stablecoin does not fall under the purview of the SEC as it is a currency, not a security.
The defense team has also argued that the company did not conduct any public offerings of securities that would have warranted an SEC registration. They further assert that Congress has not granted the SEC the power to regulate the digital assets at issue in this case.
Kwon still faces criminal fraud charges by U.S. prosecutors, as well as charges of capital markets law violations in South Korea. Both nations have requested his extradition, and Kwon must first face trial and possible jail time in Montenegro.
This case highlights the ongoing tension between regulators and the crypto industry as both sides seek to assert their authority and define the boundaries of regulatory power in the rapidly-evolving digital asset space. It also underscores the need for clear and consistent regulatory frameworks to ensure a level playing field for all participants in the market.