The SEC Seeks Summary Judgment in Legal Battle with Terraform Labs
The U.S. Securities and Exchange Commission (SEC) is urging a Manhattan judge to deliver summary judgment in its case against Terraform Labs and its co-founder Do Kwon. The agency argues that the evidence clearly shows that Kwon violated securities laws in the distribution of the Terra blockchain’s native cryptocurrency, LUNA, and its stablecoin TerraUSD (UST).
SEC Accuses Do Kwon of Deception
In its court filing, the SEC accuses Kwon and Terraform of deceiving the public about the safety and usage of their protocol and tokens. The firm allegedly made false claims about partnerships and conducted fake transactions to inflate network activity. Kwon also lied to investors about the stability of UST, falsely claiming that it automatically self-healed. The SEC alleges that a secret side deal was struck to manipulate UST’s value.
UST Collapse and Breaking Securities Law
The collapse of UST led to a hyperinflationary death spiral for LUNA. Additionally, the SEC claims that LUNA and MIR were issued to investors without registering their sales. The agency takes issue with how these “crypto asset securities” were marketed, as buyers were promised transaction fee shares and appreciation in LUNA’s value based on increased network adoption. This violates securities laws as it promises profits based on the efforts of another group.
Hot Take: SEC Pushes for Resolution in Terra Case
The SEC is pushing for summary judgment in its legal battle with Terraform Labs and Do Kwon, alleging violations of securities laws. The agency accuses Kwon of deception by making false claims about partnerships and engaging in fake transactions to boost network activity. It also asserts that a secret side deal was struck to manipulate the value of UST. The collapse of UST and LUNA’s hyperinflationary spiral further exacerbated the situation. The SEC also argues that the defendants broke securities laws by issuing tokens without registering their sales and marketing them as investment opportunities. This case highlights the SEC’s continued efforts to regulate the cryptocurrency industry.