Paradigm, a crypto-focused investment firm, has filed an amicus brief in the US SEC lawsuit against Terraform Labs and its co-founder Do Kwon, challenging the SEC’s theory that stablecoins are securities.
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 alleges that the SEC has abused its authority to issue regulatory guidelines and force crypto firms to comply with securities laws.
Paradigm’s Seira says SEC’s stablecoin theory broadens security scope.
The SEC under Gary Gensler filed lawsuits and took enforcement actions against failed crypto entities such as Terra, Do Kwon, and Bittrex to expand its jurisdiction over crypto. Actions have not protected any investors or other parties.
Fraud and securities breaches led SEC to file a lawsuit against Terraform Labs and Do Kwon On February 16.
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 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 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 that it is not a security.
The South Korean court also declared Terra (LUNA) and UST, an algorithmic stablecoin, not 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 clarity2. On April 21, Paradigm issued a policy article on SEC registration issues.
It criticized SEC Chair Gary Gensler for forcing crypto assets that may or may not be securities into an unsuitable disclosure structure.
