In a significant development in the ongoing legal battle between Terraform Labs and the U.S. Securities and Exchange Commission (SEC), a pivotal ruling was delivered on December 28 by United States Federal Judge Jed Rakoff. The judge declared that tokens associated with Terraform Labs, including Luna and MIR, are to be classified as securities. This ruling marks a crucial turning point in the lawsuit initiated in February and is expected to have far-reaching implications for Terraform Labs and the involved cryptocurrencies.
➖ UST, LUNA, wLUNA, & MIR are declared securities! See the ruling here: (https://t.co/JIChNq9q3Q)
➖ A US court has ruled in favor of the SEC against Terraform Labs.… pic.twitter.com/wVP10hWEqM
— Logll (@LogllNews) December 29, 2023
Key Points from the Latest Ruling
- Securities Violation: Judge Jed Rakoff’s summary judgment concluded that Terra-linked tokens, Luna and MIR, are indeed securities, classifying them as investment contracts. This aligns with the SEC’s perspective, suggesting potential regulatory consequences for Terraform Labs and the implicated cryptocurrencies.
- Ongoing Legal Battle: Despite this ruling, the legal battle between Terraform Labs and the SEC continues. The judge rejected motions for summary judgment on fraud charges from both parties. The case will proceed to trial, with the jury delving into the intricacies of the lawsuit.
- Testimonies Allowed: Judge Rakoff permitted testimonies from both Terraform Labs and the SEC, excluding only two defence witnesses, with a focus on Terra’s custodial wallets. This decision puts Luna and MIR under the scrutiny of the SEC.
Allegations Against Terraform Labs
The SEC filed a lawsuit against Terraform Labs and its chief, Do Kwon, in February, alleging a multi-billion securities fraud. The regulatory body contended that the crypto company utilized its stablecoin TerraUSD to facilitate fraudulent activities.
Terraform Labs has countered the SEC’s claims, asserting that the watchdog lacks evidence supporting the classification of its assets as securities.
The attention now shifts to the upcoming trial on fraud charges scheduled for January 24, 2024. This trial is expected to provide further insights into the complex legal disputes between Terraform Labs and the SEC, shaping the trajectory of the case in the coming months.
The outcome of this legal battle will not only impact Terraform Labs but also set precedents for the broader cryptocurrency industry, influencing how regulatory bodies view and regulate digital assets in the future. The crypto community awaits further developments as the lawsuit unfolds in the courtroom.