Four Crypto Tokens Sold by Terraform Labs Deemed Unregistered Securities
A recent summary judgment ruling by Judge Jed Rakoff of the U.S. Court for the Southern District of New York has classified four crypto tokens sold by Do Kwon and Terraform Labs as unregistered securities. The tokens in question are TerraUSD (UST), LUNA, wLUNA, and Mirror Protocol (MIR). However, the ruling dismissed the notion that Terra’s Mirror Protocol “mAssets” constituted security-based swaps.
Chai Payments Platform Not Operating on Terra Blockchain
The ruling also revealed that the Chai payments platform, frequently promoted as a real-world use case of the Terra blockchain, did not actually operate on the blockchain as claimed. Instead, payments were settled using traditional methods and then recorded on the Terra blockchain through a server controlled by Kwon. Evidence presented includes an email from a Chai employee stating that transactions were processed outside the blockchain.
Disputes of Material Fact Remain
Although compelling evidence was presented, Judge Rakoff acknowledged that disputes of material fact remain. These disputes revolve around the credibility of whistleblowers and inconsistencies in their accounts. The defense argues that one whistleblower attempted to extort Kwon and Terra co-founder Daniel Shin after being terminated from Chai. Despite this, a federal judge has ruled that Kwon and Terraform Labs violated US law by failing to register two digital currencies.
Hot Take: SEC Whistleblower Exposes Lack of Crypto Usage in Chai Payments App
A recent ruling has shed light on the lack of crypto usage in the Chai payments app within the Terra ecosystem. The evidence presented suggests that payments were settled using traditional methods and then recorded on the Terra blockchain through a server controlled by Do Kwon. This revelation raises questions about the authenticity of real-world use cases promoted by blockchain companies. The ruling also highlights ongoing disputes of material fact and the potential consequences for Kwon and Terraform Labs. As the case proceeds to trial, it remains to be seen how this will impact the regulatory landscape for crypto tokens and securities.
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