A federal judge ruled Thursday that Terraform Labs and its founder Do Kwon were offering and selling unregistered securities in the form of cryptocurrencies, including LUNA and UST, a major victory for the Securities and Exchange Commission (SEC).
Judge Jed Rakoff of the U.S. District Court for the Southern District of New York granted summary judgment to the SEC on claims that Terraform offered unregistered securities and securities-based swaps. That means these issues won’t be in dispute when the SEC files suit against the company and its affiliates. The founder will be put on trial.
Unless agreed upon in advance, the jury in the case will now only be asked to determine other elements of the securities fraud charges, such as whether Kwon misled or defrauded customers about the security of Terraform’s financial products, including the algorithmic stablecoin UST.
Last May, UST, a so-called algorithmic stablecoin that remains par for the course with the U.S. dollar despite holding no cash —foldedIt wiped out about $60 billion worth of value and triggered a cryptocurrency winter that has yet to subside.
In addition to seeking to classify Terraform’s multiple cryptocurrency issuances as illegal unregistered securities offerings, the SEC alleged that Kwon engaged in a scheme to deceive investors about the nature and security of UST’s dollar peg.
At the end of October, Mr. Kwon’s lawyers attempted the following. dismiss the case, the SEC argued that Terraform failed to prove that it offered securities or engaged in illegal conduct. On at least one of those points, the judge wasn’t quite sure.
>Just like me
>Take a short nap
>Wake up
>Stablecoins are securities— _gabrielShapir0 (@lex_node) December 28, 2023
If the trial proceeds as scheduled, jury selection will begin Jan. 29 in lower Manhattan.
The SEC case is just one of several legal issues currently plaguing Kwon. Last March, the Ministry of Justice Charge to cryptocurrency founders Eight offenses of fraud were committed. That day too, Mr. Kwon Arrested in Montenegro After fleeing his native South Korea after facing charges.
Now prosecutors in the United States, South Korea and Montenegro all want a piece of him. Earlier this month, a Montenegrin judge stopped The U.S. government’s request for Mr. Kwon’s extradition is currently under review.
