The SEC Seeks Summary Judgment in Lawsuit Against Do Kwon and Terraform Labs
The U.S. Securities and Exchange Commission (SEC) is requesting a summary judgment in its lawsuit against Do Kwon and Terraform Labs, bypassing a full trial. The SEC argues that the pooling of funds in a collective venture, with profits primarily dependent on the promoters’ efforts, qualifies as a security under federal law according to the Howey test. The agency accuses Terraform and Kwon of misleading investors about the stability of the TerraUSD (UST) stablecoin, claiming that undisclosed third-party interventions were responsible for UST’s price stability, contradicting previous statements about the algorithm’s effectiveness.
Do Kwon’s Legal Appeal and Incarceration
Kwon’s lawyers have previously appealed to the court, asserting that the SEC has not adequately proven the offering of securities. Meanwhile, Kwon himself is currently imprisoned in Montenegro on charges of document forgery after being arrested for possessing fake passports.
Co-Founder Daniel Shin’s Disengagement and Falling Prices
Terraform’s co-founder, Daniel Shin, has distanced himself from the situation, blaming Kwon’s mismanagement for the downfall of Terraform Labs. He emphasized that he had disengaged from the company’s operations two years before its failure. As a result of the ongoing legal issues, prices of Terra (LUNA) and Terra Classic (LUNC) have declined recently, contributing to investor caution regarding Terra ecosystem tokens amidst broader price volatility concerns.
Hot Take: The SEC Pushes for Summary Judgment in Terraform Labs Lawsuit
The U.S. Securities and Exchange Commission is intensifying its efforts against Do Kwon and Terraform Labs by seeking a summary judgment in its lawsuit against them. By invoking the Howey test, the SEC argues that Terraform’s pooling of funds and reliance on promoters’ efforts classify it as a security under federal law. The agency accuses Kwon and Terraform of deceiving investors about the stability of the TerraUSD stablecoin, claiming undisclosed third-party interventions were responsible for its price stability. This legal battle continues to overshadow the Terra ecosystem, resulting in declining prices for Terra tokens. The outcome of this lawsuit will have significant implications for the future of decentralized finance.
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