Do Kwon, co-founder of Terraform Labs, is currently facing a lawsuit from the US Securities and Exchange Commission (SEC) for allegedly defrauding US investors by offering unregistered securities. However, Kwon’s lawyers have recently dismissed the SEC’s allegations, arguing that the regulator has failed to provide sufficient proof in their case.

The SEC’s lawsuit revolves around the $40 billion collapse of TerraUSD (UST) and Luna (LUNA) cryptocurrencies. According to an article in Bloomberg, Kwon’s legal team has claimed that the stablecoin in question is a currency, not a security, making it exempt from the SEC’s jurisdiction. They have also accused the SEC of trying to “shoehorn all cryptocurrencies into its definition of a ‘security'”, which they say is an improper assertion of power.

Kwon was arrested on March 23 at Podgorica airport in Montenegro while attempting to fly to Dubai with fake documents. Since then, both South Korean and American authorities have requested Kwon’s extradition, but it remains unclear which country will be granted the extradition.

This legal battle has raised questions about the future of Do Kwon, Luna, and the TerraLuna Foundation. If the court sides with the SEC, Kwon could face significant penalties and further tarnish the reputation of Terraform Labs and its associated cryptocurrencies. On the other hand, if Kwon’s lawyers successfully argue that the stablecoin is not a security, it could set a precedent for other cryptocurrency projects facing similar allegations.

In addition to the SEC’s lawsuit, Kwon is also facing charges in South Korea related to the TerraUSD collapse. The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong, citing unconfirmed allegations and the unlikelihood of Shin being a flight risk or destroying evidence.

As the legal proceedings unfold, the fate of Do Kwon, Terraform Labs, and its associated cryptocurrencies hangs in the balance. The outcomes of these lawsuits could have significant implications for the broader cryptocurrency industry, as they may influence future regulatory actions and the classification of cryptocurrencies as securities.