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Paradigm’s Legal Director Responds to SEC’s Lawsuit Against Terra and Do Kwon

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On April 25th, Rodrigo, the legal director of Paradigm, said on Twitter: \”Paradigm submitted a amicus curiae briefing in the US SEC\’s lawsuit against Terra and Do Kwon. Paradigm is

Paradigms Legal Director Responds to SECs Lawsuit Against Terra and Do Kwon

On April 25th, Rodrigo, the legal director of Paradigm, said on Twitter: “Paradigm submitted a amicus curiae briefing in the US SEC’s lawsuit against Terra and Do Kwon. Paradigm is not an investor in Terra, and the briefing we submitted does not support any party’s motion. Our only interest is to counter the SEC’s attempt to continue to expand its jurisdiction over cryptocurrencies.” Rodrigo mentioned: Through enforcement actions against Terra, the SEC attempts to advance an infinite theory that includes stable currency within its jurisdiction, that is, if any instrument can be traded as a so-called “crypto asset security,” then the instrument itself will become a “crypto asset security. Our briefing focuses on responding to the SEC’s new theory that algorithmic stable currency UST is a security. The SEC’s theory of UST is a supplement to the core claims in litigation. Nevertheless, we believe it is crucial that Judge Rakoff, who is responsible for this case, avoid unintentionally supporting this unsupported theory, and that the US Securities and Exchange Commission can seek to widely apply it to other stable currencies

Paradigm: In order to avoid SEC defining stable currency as securities, amicus curiae briefing has been submitted in Terra case

On April 25th, Rodrigo, the legal director of Paradigm, took to Twitter to address the recent lawsuit filed by the US Securities and Exchange Commission (SEC) against Terra and its co-founder, Do Kwon. In his tweet, Rodrigo explained that Paradigm had submitted an amicus curiae brief in response to the lawsuit, with the sole intention of countering the SEC’s attempt to expand its jurisdiction over cryptocurrencies.

Background of the SEC’s Lawsuit Against Terra and Do Kwon

In February 2021, the SEC filed a lawsuit against Terra and its co-founder, Do Kwon, alleging that the $150 million sale of its native token, LUNA, constituted the offering of securities without proper registration or exemption. The SEC also claimed that Terra’s algorithmic stablecoin, UST, was a security under the Howey Test, which defines securities as investments in a common enterprise, with profits primarily derived from the efforts of others.

Paradigm’s Response to the SEC’s Lawsuit

Paradigm is not an investor in Terra, and the amicus curiae brief it submitted does not support any party’s motion. Rather, Paradigm’s brief focuses on the SEC’s new theory that UST is a security, and aims to counter this theory.
In his tweet, Rodrigo stated that the SEC’s attempt to advance an infinite theory that includes stable currencies within its jurisdiction is concerning. He argued that if any instrument can be traded as a so-called “crypto asset security,” then the instrument itself will become a “crypto asset security.”
He further noted that the SEC’s theory of UST is a supplement to the core claims in litigation, but still, it is important that Judge Rakoff, who is responsible for this case, avoid unintentionally supporting this unsupported theory. Rodrigo expressed concern that if the SEC can succeed in broadly applying this theory to other stable currencies, it could have a significant impact on the entire cryptocurrency market.

Implications of the SEC’s Lawsuit

The SEC’s lawsuit against Terra and Do Kwon has significant implications for the wider cryptocurrency market. It highlights the ongoing ambiguity around the regulatory framework governing cryptocurrencies and stablecoins, particularly with respect to the Howey Test.
If the SEC’s theory of UST as a security is adopted, it could set a dangerous precedent that would subject other stablecoins to increased regulatory scrutiny. This would have a chilling effect on the innovation and growth of the entire cryptocurrency industry.
However, if Paradigm’s amicus curiae brief is successful in countering the SEC’s theory, it could help clarify the regulatory framework around stablecoins, giving the industry much-needed clarity and enabling it to continue to grow and innovate.

Conclusion

Paradigm’s response to the SEC’s lawsuit against Terra and Do Kwon highlights the regulatory uncertainty around cryptocurrencies and the potential consequences of expanding the SEC’s jurisdiction over them. As the case unfolds, it will be important to pay attention to any rulings that may set new precedents for the wider cryptocurrency market.

FAQ

Q: What is the SEC’s lawsuit against Terra and Do Kwon about?
A: The SEC alleges that the sale of Terra’s native token, LUNA, constituted the offering of securities without proper registration or exemption. It also claims that Terra’s algorithmic stablecoin, UST, is a security under the Howey Test.
Q: How could the SEC’s lawsuit impact the cryptocurrency market?
A: If the SEC’s theory of UST as a security is adopted, it could subject other stablecoins to increased regulatory scrutiny, hampering the growth and innovation of the cryptocurrency industry.
Q: What is Paradigm’s amicus curiae brief aiming to achieve?
A: Paradigm’s brief aims to counter the SEC’s attempt to expand its jurisdiction over cryptocurrencies and provide clarity around the regulatory framework governing stablecoins.

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