Lawyers representing the United States Securities and Exchange Commission (SEC) have argued that the additional documents submitted by Dentons — the law firm representing Terraform Labs and Do Kwon — in support of its motion to dismiss the lawsuit lack adequate support for dismissing the case.
The SEC’s counsel asserts that the Binance.US transcript and internal SEC emails presented by the defense are irrelevant to the current case. They argue that the Howey test clearly defines the parameters of an “investment contract” and contend that TerraUSD (UST) should be classified as a security.
In a court hearing on June 15, Dentons submitted supplementary documents to bolster its motion to dismiss the lawsuit filed by the U.S. SEC. The focus of the hearing was to determine if the digital assets developed by Terraform Labs should be classified as securities under the criteria of an “investment contract.“
Dentons assert that the algorithmic stablecoin, UST, is not classified as a security, emphasizing its practical purpose rather than an investment contract. In support of its motion to dismiss the lawsuit, it submitted supplementary 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 vs. Ripple lawsuit.
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The defense lawyers highlighted a “regulatory gap” regarding the classification of crypto assets as securities, particularly as the U.S. Congress engages in discussions about regulatory frameworks for digital assets and stablecoin issuance. Additionally, they argued that the SEC is exceeding the scope of securities laws and relying on internal emails related to “investment contracts” to determine the security status.
Judge Jed Rakoff, who is presiding over the case, has announced that a decision on the motion to dismiss the case will be handed down by July 14.
Dentons previously represented Kwon in challenging the U.S. SEC’s subpoena in its investigation of the Mirror Protocol in 2021 and a class-action lawsuit in the Singapore High Court in 2022. The law firm also represents Terraform Labs in other cases.
Meanwhile, the Montenegrin High Court has approved bail for Kwon and former Terra chief technology officer Han Chang-joon. Most recently, Kwon has been taken into extradition custody in Montenegro while the court decides on South Korea’s extradition request for the Terra founder.
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