Terraform Labs Found Guilty of Offering Unregistered Securities
A federal judge has ruled that Terraform Labs and its founder, Do Kwon, offered and sold unregistered securities in the form of cryptocurrencies. This decision is a significant win for the Securities and Exchange Commission (SEC). Judge Jed Rakoff of the U.S. District Court Southern District of New York granted the SEC summary judgment on claims that Terraform offered unregistered securities and security-based swaps. As a result, these matters will not be up for debate during the upcoming trial. The jury will now only need to determine other elements of the securities fraud charges, such as whether Kwon deceived customers about Terraform’s financial products.
The Collapse of UST and Allegations Against Kwon
In May of last year, the algorithmic stablecoin UST collapsed, causing massive losses and triggering a crypto winter. The SEC has accused Terraform of issuing multiple cryptocurrencies as illegal unregistered securities offerings. They have also alleged that Kwon engaged in a scheme to deceive investors about the nature and security of UST’s $1.00 peg. In response to these allegations, Kwon’s attorneys attempted to dismiss the case, but their arguments were unsuccessful.
Upcoming Trial and Legal Troubles for Kwon
If the trial proceeds as scheduled, jury selection will begin on January 29 in lower Manhattan. However, this SEC case is just one of several legal problems that Kwon is facing. In March, he was charged with eight criminal counts of fraud by the Department of Justice. On the same day, he was arrested in Montenegro after evading charges in South Korea. Now, American, South Korean, and Montenegrin prosecutors are all pursuing legal action against him.
Hot Take: Uncertain Future for Terraform Labs and Kwon
Terraform Labs and its founder, Do Kwon, have been dealt a major blow with the ruling that they offered unregistered securities. This decision by the federal judge strengthens the SEC’s case against them. With jury selection approaching, the outcome of the trial will have significant implications for Kwon and Terraform Labs. Additionally, Kwon’s legal troubles extend beyond this SEC case, as he faces criminal charges and extradition requests from multiple countries. The future remains uncertain for both Terraform Labs and Kwon as they navigate these legal challenges.
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