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SEC argues against Dentons’ motion to dismiss Terraform and Do Kwon’s lawsuit

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2 days ago

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The lawyers representing the United States Securities and Exchange Commission (SEC) have contended that the additional documents submitted by Dentons, the legal counsel for Terraform and Do Kwon, in support of their 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, hold no relevance to the current case. They argue that the Howey Test clearly defines the parameters of an “investment contract” and contend that UST should be classified as a security.

In a court hearing on June 15, Dentons submitted supplementary documents to bolster their 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.”

The legal team from Dentons asserts with conviction that the algorithmic stablecoin UST (now USTC) is not classified as a security, emphasizing its practical purpose rather than being an investment contract. In support of their motion to dismiss the lawsuit, they submitted supplementary documents, which encompass 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 lawyers highlighted the existence of 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 rendered by July 14th.

Dentons represented Do Kwon earlier to challenge the US SEC subpoena in its investigation of Mirror Protocol in 2021 and a class action lawsuit in the Singapore High Court in 2022. The law firm also represents Terra in other lawsuits.

Related: Do Kwon could serve prison in both US and South Korea, prosecutor says

Meanwhile, Montenegro High Court has approved the bail of Do Kwon and former CTO Han Chang-joon. Also, Do Kwon has been taken into extradition custody in Montenegro while the court decides on South Korea’s extradition request for him.

Magazine: Do Kwon kicked in the assets



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Cryptocurrencies

Tether responds to account deactivation controversy, raises compliance checks

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12 hours ago

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June 17, 2023

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Tether, the company behind market-leading stablecoin Tether (USDT), has addressed concerns regarding its operational decisions.

According to documents released by the New York Attorney General (NYAG), Tether reportedly deactivated approximately 29 accounts belonging to prominent cryptocurrency players in 2021. It appears that most individuals on the list had their accounts terminated for different reasons.

While the reasons for the account terminations were not disclosed, Tether responded by indicating that it is unwilling to comment on individual relationships. However, the company clarified that all individuals had undergone rigorous compliance checks during onboarding, as well as ongoing monitoring, as mandated by Tether’s compliance policies.

Among the deactivated accounts were MoonPay, BlockFi, CMS Holdings and Galois Capital.

Although the NYAG investigation concluded as early as February 2021, it has come to light that certain documents in the investigation extend until around June of the same year. User codes within these documents have already been redacted.

The NYAG gathered these documents while investigating Tether and its sister company Bitfinex for misappropriating $850 million in funds. During this time, iFinex — the parent company of both entities — requested a 30-day extension to produce the critical financial documents before the expiration of the previously scheduled date.

Related: USDT issuer Tether responds to Chinese securities exposure reports

Ultimately, the involved parties reached a settlement in which Tether agreed to pay a penalty of $18.5 million and halt trading activities in New York. Subsequently, media outlets and Coinbase requested the NYAG to publicly disclose Tether’s initial quarterly report under the Freedom of Information Act. However, Tether objected to this request, citing the need to safeguard its customers’ confidential information from potential exploitation by malicious individuals.

Despite Tether’s objection, the NYAG allowed media outlets access to the documents, revealing the deactivation of numerous company accounts.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom