Terra Lawyers File Motion to Dismiss Case Against Do Kwon

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According to the recent updates, on June 15, the US SEC as well as the lawyers representing Terraform Labs and co-founder of the Terra ecosystem, Do Kwon, submitted responses to the lawsuit’s application to be dismissed in the US District Court for the Southern District of New York.

Terra’s UST Stablecoin is not a Security

Attorneys assert that algorithmic stablecoin UST (USTC), which was created for use in transactions instead of being used as an investment contract, is not a security.

As the US Congress analyzes legal frameworks for the issue of digital assets and stablecoins, they bring up the “regulatory gap” over whether crypto assets qualify as securities. 

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Hinman Documents Might Play an Important Role

They also provided other papers to support the move to dismiss the action, including the US House Financial Services Committee hearing, the SEC request for a restraining order against Binance.US, and Hinman emails in the SEC v. Ripple litigation. 

On the other hand, US SEC attorneys claimed that the plaintiffs’ supplementary documents do not support the move to dismiss the ongoing case

UST was a Security based on Howey Test

Additionally, the transcript from Binance.US and the internal SEC mails are irrelevant to this situation. They argue the Howey Test clearly defines what’s called a “investment contract,” and therefore UST was a security.

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TerraUSD (UST), Do Kwon’s stablecoin, lost its peg to the US dollar last year. Following the fall in May, the value of TerraUSD and its associated cryptocurrency, LUNA, was devalued, which caused an extreme loss to many investors. 

Other Lawsuits Against Terra

However, back in May, it was revealed that Terraform Labs was attempting to have a class action lawsuit against the firm dismissed on the grounds that the foreign-developed standards it uses are exempt from the U.S. securities laws at issue. 

The lawsuit was filed by Nick Patterson, who alleged the business offered securities that were not registered. 

The same explanation, as stated by Terraform, applies to the lawsuit’s RICO accusations, which claimed the firm’s goal was to make money without considering the needs of individual investors. 

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