In the latest legal maneuver, Terraform Labs and its former CEO Do Hyeong Kwon (Do Kwon) have submitted a comprehensive Motion for Summary Judgment, seeking an immediate dismissal of the fraud charges levied against them by the U.S. Securities and Exchange Commission (SEC).
Terraform Labs and Do Kwon Push Back Against SEC Accusations
Lawyers for Terraform Labs and Do Kwon have challenged the SEC’s accusations, which allege that Kwon and his company orchestrated a multi-billion dollar crypto-asset securities fraud, involving unregistered transactions and a suite of interconnected crypto-assets. The U.S. regulatory body insists that Kwon played a central role in an elaborate scheme, and reportedly manipulated the market to the detriment of investors.
Terraform Labs and Kwon, however, have vehemently denied these accusations, asserting their innocence and challenging the SEC’s legal standing and interpretation of the facts. The Motion for Summary Judgment filing argues that the commission has failed to provide concrete evidence that they offered or sold “investment contracts.”
“After two years of investigation, the completion of a discovery period that resulted in the taking of more than 20 depositions, and the exchange of over two million pages of documents and data, the SEC is evidentiarily no closer to proving that the defendants did anything wrong,” the attorney’s motion insists.
The defendants criticize the SEC’s application of the Howey test, a legal benchmark used to determine if a transaction qualifies as an investment contract and thus a security. They assert that the crypto assets in question, including UST, LUNA, WLUNA, and MIR, do not meet the criteria of investment contracts, challenging the very foundation of the SEC’s case.
“All three elements of the Howey test must be met for the sale of an asset to constitute an investment contract,” the motion explains. “After extensive discovery, and further investigation into the factual record underpinning Howey, it is clear that defendants are entitled to summary judgment on the grounds that the assets at issue here are not securities,” the lawyers add.
In addition to disputing the characterization of the crypto assets as securities, Terraform Labs and Kwon also argue that even if the assets were deemed securities, they would be exempt from registration requirements. “There is no genuine issue of material fact that, even if LUNA or MIR were securities, they were exempt from registration,” the filing states.
The legal stance highlights the complexities of applying traditional securities laws to the rapidly evolving world of crypto assets. The motion emphasizes the lack of clarity in existing laws and the SEC’s alleged misapplication of these laws. “For all the foregoing reasons, the court should grant summary judgment in its entirety with prejudice,” attorney Douglas Henkin from Dentons US LLP concludes.
What’s your take on the legal move by Do Kwon and Terraform Labs aiming to dismiss the SEC’s lawsuit? Share your thoughts and opinions about this subject in the comments section below.