SEC opposes motion to dismiss its suit against Do Kwon

Documents provided by the lawyers for TFL and its co-founder Do Kwon in support of the SEC‘s suit do not contain sufficient grounds for dismissal of the case. The regulator’s representatives said.

On June 15, during the hearing, the defendants presented additional documents in support of their request. Their substance centered on determining whether the assets created by the firm meet the criteria of securities.

algorithmic stablecoin TerraUSD (UST) should not be classified under this status given its practical rather than investment purpose.

They backed their arguments with transcripts of hearings of the US House Committee on Financial Services, the SEC’s motion against Binance.US and emails from former Commission official William Hinman in the Ripple litigation.

In the regulator’s view, the aforementioned documents have no bearing on the current case. The Howey test clearly defines the parameters of an ‘investment contract’ to which UST corresponds, they added.

The defense pointed to regulatory gaps in the classification of crypto assets as securities amid the US Congress’s discussion about the regulatory framework for digital assets and the issuance of ‘stablecoins’.

They also noted that in determining the status of securities the SEC goes beyond the applicable law and relies on internal emails related to investment contracts.

Judge Jed Rakoff ruled that a ruling on the motion to dismiss will be issued by July 14.

In September 2022, South Korea issued an arrest warrant for Do Kwon and five other TFL employees on charges including violations of capital markets laws.

On March 23, Montenegrin police arrested an entrepreneur attempting to fly out of Podgorica Airport to Dubai with forged documents. In June he was released under house arrest, with bail set at €400,000 ($436,000).

Previously, South Korea urged Montenegro to extradite Kwon to his homeland. The United States also seeks his extradition, where he faces fraud charges brought by the SEC and the U.S. Attorney’s Office for the Southern District of New York.