The judge presiding over the lawsuit involving Do Kwon, Terraform Labs, and the US SEC ruled that Kwon and his company violated US laws. In a summary judgment, Judge Rakoff found in favour of the SEC, ruling that Terraform failed to register LUNA and MIR as securities.
Federal Judge Jed Rakoff issued summary judgements siding with the SEC that Terraform Labs violated securities law when it illegally sold its cryptocurrencies to the public.
Judge Rules $LUNA and $MIR Token are Securities
According to Bloomberg and The Strait Times reports, Judge Jed Rakoff ruled in favour of the US Securities and Exchange Commission, agreeing that Do Kwon and his company Terraform Labs illegally sold unregistered securities to the public. The unregistered securities in question are $LUNA and Mirror Protocol ($MIR). According to The Strait Times and a report by Reuters, Judge Rakoff dismissed the SEC’s allegations that Terraform made transactions in unregistered security-based swaps. The civil trial is scheduled to begin on January 29, 2024.
Judge Rakoff’s decision aligns with the SEC’s argument that most cryptocurrencies should be classed as securities and regulated by the agency. Unfortunately for the SEC, Judge Rakoff’s ruling only allows the SEC to regulate LUNA and MIR.
The trial and charges against Terraform and Kwon stem from the implosion of Terra’s UST stablecoin in 2022. The SEC alleged that Kwon, Terraform Labs, and Terraform raised $25 million through a fraudulent security offering. Lawyers for Kwon and Terraform Labs recently filed a motion for a summary judgment asking Judge Rakoff to dismiss the SEC’s case, arguing that $LUNC and $MIR do not constitute securities.
Trial to Proceed with Jump Trading Involved
The newly introduced evidence from Jump Crypto will surely be interesting and reveal new details about the case. Judge Rakoff recently allowed Jump to submit confidential discovery material in the case. Jump is believed to be involved in manipulating TerraUSD and allegedly profited $1.28 billion from its activities. According to the SEC, Terra loaned “a US trading firm” 30 million Terra tokens in November 2019 and an additional 65 million LUNA in September 2020. According to reports, Jump Crypto is believed to be the firm in question.
SEC Argues a Jury Should Not Determine the Status of Securities
In its endless back and forth, the SEC recently requested that Judge Rakoff be the one to rule whether Terraform offered and sold unregistered securities. The agency argued that a jury should not determine the status of securities and said the matter is a “legal question to be determined [by] the Court, not a factual question for the jury.”
While the civil matter is scheduled to proceed, Do Kwon sits comfortably in a prison in Montenegro. Kwon was set to be extradited to the US to face criminal charges but successfully appealed his extradition with a high court in Montenegro.
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Source: https://cryptodaily.co.uk/2023/12/judge-rules-do-kwon-violated-law-terraform-and-sec-set-for-trial-in-january