Terraform Labs’ Motion to Dismiss Denied in Lawsuit from SEC
Terraform Labs, the issuer of stablecoin, UST, had its motion to dismiss a lawsuit from the U.S. Securities and Exchange Commission (SEC) denied by a federal judge. This ruling is significant as it contradicts a recent ruling in the case of Ripple Labs, where a judge ruled that Ripple did not violate securities law by making XRP available to retail investors on secondary platforms. The SEC sued Terraform and its founder, Do Kwon, earlier this year on charges of misleading investors and fraud. Terraform argued that UST was bought for practical purposes and not as an investment. However, Judge Rakoff rejected this argument, stating that the expectation of profit applies to all purchasers, regardless of how they acquired the coins.
Main Breakdowns:
- Terraform Labs’ motion to dismiss lawsuit from SEC denied
- Judge Rakoff rejects ruling in Ripple case
- Terraform sued for misleading investors and fraud
- Terraform argues UST was bought for practical purposes
- Judge Rakoff rejects Terraform’s argument
Hot Take:
This ruling by Judge Rakoff is a blow to Terraform Labs and could have implications for other stablecoin issuers facing similar lawsuits from the SEC. The judge’s rejection of the argument that UST was not an investment and the application of the expectation of profit to all purchasers may set a precedent for future cases. It remains to be seen how this will impact the regulation of stablecoins and the crypto industry as a whole.
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