New York Judge Rules in Favor of SEC in Unregistered Securities Case
A New York judge has ruled in favor of the Securities and Exchange Commission (SEC) in its claim that Terraform Labs and its co-founder, Do Hyeong Kwon, offered and sold unregistered securities. The judge granted summary judgment for the SEC on this claim, while also siding with Terraform on other claims involving security-based swaps.
UST, LUNA, wLUNA, and MIR Confirmed as Securities
Judge Jed Rakoff stated that there is no dispute that UST, LUNA, wLUNA, and MIR are securities because they are investment contracts. However, the court denied motions from both sides for a summary judgment on fraud claims, which will now go to a jury.
SEC Charges Terraform Labs and CEO Do Kwon
The SEC charged Terraform Labs and its CEO Do Kwon in February for alleged securities fraud related to their algorithmic stablecoin Terra USD. The agency accused them of orchestrating a “multi-billion dollar crypto asset securities fraud” and raising funds through unregistered transactions.
Algorithmic Stablecoins Linked to Luna Token
Algorithmic stablecoins like Terra USD use algorithms to maintain a stable price. Terra USD was linked to Luna, a governance token. However, Terra USD experienced a crash in May, resulting in significant losses.
Jury Trial Set for Remaining Claims
A jury trial for the remaining claims in the case is scheduled to begin on January 24, 2024.
About the Author
Sarah is a reporter at The Block covering policy, regulation, and legal matters related to cryptocurrency. She has extensive experience in reporting on securities regulation and finance-related topics. Sarah is based in Washington D.C. and can be followed on Twitter @ForTheWynn.
Hot Take: SEC Victory Highlights Need for Regulation
The New York judge’s ruling in favor of the SEC reinforces the importance of regulating the crypto industry to protect investors from potential securities fraud. The case against Terraform Labs and its CEO Do Kwon highlights the risks associated with unregistered transactions and algorithmic stablecoins. As the crypto market continues to evolve, it becomes crucial for regulatory bodies like the SEC to establish clear guidelines and enforce compliance to maintain market integrity. This ruling serves as a reminder that proper oversight is necessary for the long-term sustainability and legitimacy of cryptocurrencies.
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