Dentons’ Motion to Dismiss Terraform and Do Kwon’s Lawsuit Rejected by SEC

SEC Argues Documents Provided by Dentons are Insufficient

The lawyers representing the United States Securities and Exchange Commission (SEC) have argued that the documents provided by Dentons, the legal counsel for Terraform and Do Kwon, in their attempt to have the lawsuit dismissed, are not sufficient enough to warrant dismissal.

The counsel for the SEC maintains that the materials provided by the defense, including the Binance.US transcript and internal SEC emails, are not pertinent to the present case. They assert that the Howey Test accurately delineates the characteristics of an “investment contract” and thus contend that UST ought to be considered a security.

At the court hearing on June 15, Dentons provided additional documents to support their request to have the lawsuit brought by the U.S. SEC dismissed. The purpose of the hearing was to decide if the digital assets created by Terraform Labs should be considered securities based on the definition of an “investment contract.”

The legal team from Dentons strongly maintains that UST (now USTC), an algorithmic stablecoin, is not considered a security, emphasizing its practical use rather than being an investment contract. To back up their motion to dismiss the lawsuit, they submitted additional documents, which include the U.S. House Financial Services Committee hearing on digital asset regulation and stablecoin issuance, the SEC’s request for a restraining order against Binance.US, and the Hinman emails from the SEC v. Ripple lawsuit.

The defense attorneys underscored the presence of a “regulatory void” concerning the designation of crypto assets as securities, especially as the U.S. Congress contemplates regulatory structures for digital assets and stablecoin distribution. Moreover, they claimed that the SEC is overreaching the bounds of securities regulations and depending on internal emails associated with “investment contracts” to decide the security status.

Judge Jed Rakoff to Issue Ruling by July 14th

Judge Jed Rakoff, who is presiding over the case, has declared that a ruling on the motion to dismiss the case will be issued by July 14th.

Dentons previously represented Do Kwon in his contestation of a US SEC subpoena pertaining to its investigation of Mirror Protocol in 2021, as well as in a class action lawsuit in the Singapore High Court in 2022. Additionally, the law firm also provides legal counsel to Terra in other legal proceedings.

The prosecutor has stated that Do Kwon could face imprisonment in both the United States and South Korea.

The Montenegrin High Court has granted bail to Do Kwon and former CTO Han Chang-joon. Furthermore, Do Kwon is currently in Montenegrin extradition custody while the court deliberates South Korea’s extradition request.

Do Kwon invested in the assets.