Do Kwon, the embattled co-founder and CEO of Terraform Labs, the blockchain firm behind the so-called algorithmic stablecoin TerraUSD (UST) and token LUNA, urged a judge to dismiss the charges filed against him by the U.S. Securities and Exchange Commission (SEC).

Last week, Kwon's legal team filed a 47-page motion at the United States District Court Southern District Of New York to Hon. Jed S. Rakoff, contesting several claims by the SEC, deeming them invalid and shooting down the financial watchdog's argument that crypto assets like MIR, LUNA and UST are securities.

According to the motion, the digital assets involved in the case, particularly the TeraaUSD (UST), do not fall under the jurisdiction of the SEC because they are currency, not security.

"Congress has not granted the SEC the power to regulate the digital assets at issue here," Kwon's lawyers argued.

Terra Community AMA with Do Kwon (April 2021) 1-22 screenshot
Terra CEO, Do Kwon is hosted by long standing member of Terra Community @SebNondzee! Terra Official YouTube Account

Lawyers of the disgraced crypto CEO also claimed that the SEC lacked the jurisdiction to file charges against Kwon and Terraform Lab because the tokens and projects of the blockchain firm did not specifically target U.S. investors since they were "aimed at the world."

"It is not sufficient, as the SEC alleges, that conduct abroad by a defendant had a 'foreseeable substantial effect' in the United States, because a defendant must have 'expressly aimed' its conduct at the U.S.," Kwon's legal counsel stated in the motion.

Kwon's team also asked the court to dismiss the SEC charges against him and Terraform Labs because the financial regulator did not provide "fair notice" or "clarity" to the defendants on what actions violate U.S. laws.

The lawyers also alleged that the SEC misinterpreted the Howey Test, a four-pronged approach in classifying an asset as a security-based investment with the expectation of profit produced from the effort of others.

Moreover, the Terra co-founder's lawyers also said that the lawsuit is "an improper attempt" by the financial watchdog to regulate crypto using "outdated laws," even though Congress and the agency itself could not agree on what qualifies as a "security."

"The SEC's improper assertion of power here by trying to shoehorn all cryptocurrencies into its definition of a 'security' fails," the court filing read.

Earlier this month, the SEC won a major victory against Kwon and Terraform Labs when they failed to prevent the financial watchdog from accessing the company's records in Singapore, the country where Kwon fled following the spectacular crash of TfL's stablecoin and native token in May.