San Francisco-based crypto-focused investment firm Paradigm has filed an amicus brief in the US Securities and Exchange Commission (SEC) lawsuit against Terraform Labs and its co-founder Do Kwon. The venture capital firm was never invested in the Terra ecosystem and will support neither the SEC nor Terra and Do Kwon in the lawsuit. Paradigm To Push Back Against the US SEC The VC firm Paradigm filed an amicus brief in the US SEC v. Terraform Labs and Do Kwon to push back against the SEC's attempts to expand its jurisdiction over the crypto market. Paradigm claims the SEC has misused its power to provide regulatory guidance and forced enforcement action against crypto firms for violating securities laws.
Paradigm's legal head Rodrigo Seira argues the SEC's theory for treating stablecoins as securities would radically expand the definition of security. The SEC under Gary Gensler filed lawsuits and took enforcement actions against failed crypto entities such as Terra and Do Kwon and Bittrex just to expand its jurisdiction over crypto and actions have not protected any investors or other parties.
On February 16, the SEC filed a lawsuit against Terraform Labs and Do Kwon for several charges including violating securities laws and fraud. The SEC claimed in the complaint that the algorithmic stablecoin UST, now USTC, is a security. The U.S. SEC said:
"If an instrument can be exchanged for a so-called “crypto asset security,” the instrument itself becomes a “crypto asset security."
However, Paradigm claims that the Securities Laws clearly indicate that stablecoins are not securities. Stablecoins are designed to have their value pegged to fiat or different crypto assets. Thus, it can't deliver a profit. The SEC's theory contradicts decades of guidance from federal courts and would result in any barterable good becoming a security.
Do Kwon Wants the US SEC Charges Dismissed
Lawyers for Do Kwon filed a motion in a U.S. court to dismiss the charges against Terraform Labs and Do Kwon claiming a lack of SEC's jurisdiction over UST and it is not a security. South Korean court also stated that Terra (LUNA) is not a security and UST being an algorithmic stablecoin can't be referred to as securities. The court also dismissed the state’s appeal of confiscating Daniel Shin for violating the Capital Markets Act. Meanwhile, Coinbase filed a lawsuit against the SEC to take the legal route to seek regulatory clarity. Its CEO Brian Armstrong minted an NFT and called the community to “ Stand With Crypto”. Also Read: Amazon NFT Marketplace Launch Delayed