Terraform Labs continues to try to prove its innocence.
Terraform Labs, the developer behind Terra ecosystem, has recently asked a California federal judge to dismiss a class action lawsuit filed against the company by investor Nick Patterson, who alleged the firm sold unregistered securities and deceived investors.
The company's legal team, Dentons, contends that federal securities laws aren't applicable because the protocols mentioned in the lawsuit were developed and utilized outside the United States.
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The class action lawsuit in question was filed in June 2022, alleging that Terra tokens (UST and LUNA) were securities, among other accusations.
Terraform Labs' dismissal motion claims that federal securities laws and the mail and wire fraud allegations in the lawsuit are only applicable within the US. The motion states:
The federal securities laws do not apply because the SAC [Second Amended Complaint] does not allege that any of the protocols at issue were developed domestically.
The same argument extends to the suit's RICO (Racketeer Influenced and Corrupt Organizations) allegations, which assert the company's primary objective was to profit at the expense of retail investors.
Terraform Labs also argues that Nick Patterson, who filed the suit on behalf of investors, didn't sufficiently plead that mail and wire fraud allegations occurred within the US. The motion further notes that the plaintiff failed to pinpoint the location of digital wallets holding his Terra tokens, thereby undermining any "domestic injury" claims.
In February, Terraform Labs and Do Kwon were sued by the Securities and Exchange Commission (SEC), which accused entities of conducting a multibillion-dollar securities fraud.
However, in April, a South Korean court ruled that LUNA was not a security under the country's Capital Markets Act. At the end of April, the firm's co-founder Hyun-seong Shin and nine individuals linked to Terraform Labs were charged with fraud, breach of trust, and embezzlement.
At the end of March, authorities in Montenegro arrested Terraform Labs co-founder Do Kwon when he was attempting to fly to Dubai.
Terraform Labs is contesting a class action lawsuit by arguing that US securities laws don't apply to its case, raising questions about the jurisdiction and reach of these laws in an increasingly globalized crypto market.
