The United States Securities and Exchange Commission (SEC) is pushing back against the jury’s conclusion on Terraform Labs’ alleged violations. The SEC is seeking a summary judgment on all the claims made against the company. This development comes after a court filing on October 27 revealed the SEC’s dissatisfaction with the jury’s leniency towards Do Kwon, who is accused of facilitating the frauds that led to the collapse of the Terra ecosystem. The SEC argues that no rational jury could conclude that Kwon was not liable for Terraform’s violations.
The SEC’s evidence points to Kwon’s involvement in misleading crypto investors by creating and marketing Terra and its in-house token, Terra (LUNA), as securities. The SEC contends that Kwon and Terraform Labs offered and sold securities, conducted unregistered transactions involving LUNA and another token called Mirror Protocol (MIR), engaged in transactions involving mAssets, and committed fraud. The SEC’s filing seeks to establish Kwon’s liability for these violations.
In response to the SEC’s lawsuit, Kwon and Terraform Labs have requested the judge to dismiss the case, arguing that certain tokens like Terra Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and its mirrored assets (mAssets) are not securities as alleged by the SEC. However, the SEC maintains its position that these tokens qualify as securities and that Kwon and Terraform Labs violated securities laws.
During the trial, Daniel Shin, a co-founder of Terra, blamed the collapse of the Terra ecosystem on the “unreasonable operation of the Anchor Protocol and external attacks carried out by Do-hyung Kwon.” However, the company has recently shifted the blame to market maker Citadel Securities, alleging that the company was part of a concerted effort to depeg its stablecoin, TerraUSD (UST), in 2022. Citadel Securities, on the other hand, denies any involvement and refers to the company’s motion as frivolous.
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As the legal battle continues, it remains to be seen how the court will rule in this case. The outcome will have significant implications for the crypto industry, as it could set a precedent for the classification of tokens and the enforcement of securities laws in the United States.
Overall, the SEC’s request for summary judgment demonstrates its determination to hold Terraform Labs and Do Kwon accountable for their alleged violations. The SEC argues that Kwon’s involvement in misleading investors and the sale of unregistered securities warrants liability. On the other hand, Kwon and Terraform Labs maintain their innocence and argue that the tokens in question are not securities. As the case unfolds, the crypto industry watches closely, awaiting a resolution that could shape the future regulatory landscape for digital assets.
