The United States Securities and Exchange Commission (SEC) has recently filed a lawsuit against Terraform Labs and its co-founder Do Kwon, and the case could serve as a roadmap for the regulator to take down other stablecoin issuers in the future. This is according to Gabriel Shapiro, the general counsel at investment firm Delphi Labs, who explained to his 33,800 Twitter followers on Feb. 16 that the SEC’s arguments in its complaint against Kwon and Terraform were “more thorough than usual.”
Shapiro’s analysis follows the SEC’s Feb. 16 lawsuit against Kwon and Terraform, alleging they “orchestrate[d] a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.” The SEC argued that Terra’s algorithmic stablecoin, TerraClassicUSD (USTC), formerly TerraUSD (UST), constitutes a security, and applied the four prongs of the Howey test to argue that USTC, Terra Classic (LUNC) — formerly called Terra (LUNA) — and Wrapped LUNA Classic (WLUNC) all constituted securities under U.S. securities laws.
The SEC also argued that Terraform Labs breached U.S. securities laws by launching the Mirror Protocol, which allowed its users to create what Terraform called a “mAsset” — a crypto version of an asset that “mirrors” the price behavior of other assets such as stocks. The regulator claimed Terraform Labs committed this securities-based swap through the Mirror Protocol (MIR) token — which Shapiro believes to be a “first” in cryptocurrency-related lawsuits filed by the SEC.
Shapiro noted the SEC’s claim that wLUNA constituted a “receipt” for a security was another “first.” Ryan Sean Adams, the host of the crypto-oriented podcast Bankless, made a similar argument to his 221,300 Twitter followers on Feb. 16, noting that a legal victory against Terraform Labs would make it easier to go after other stablecoin issuers.
The Terra-linked tokens infamously crashed in May 2022, which was partly triggered when USTC lost its peg to the U.S. dollar. As LUNC was closely linked to USTC, its price fell by almost 100% and triggered a wider downturn in the crypto markets, wiping out approximately $40 billion. Kwon maintains that he is not “on the run” and is believed to reside in Serbia, according to South Korean officials who issued a warrant for his arrest. Earlier in February, two South Korean prosecutors flew to the Balkan state to find Kwon; however, the search attempt was unsuccessful.
The SEC’s lawsuit against Terraform Labs and Do Kwon serves as an example of the regulator’s willingness to take action against companies and individuals who are found to be in violation of U.S. securities laws. The case provides a roadmap of the SEC’s arguments and the criteria they use to determine whether a token or asset is a security.
The SEC’s lawsuit against Kwon and Terraform Labs is likely to have a wide-reaching impact on the crypto industry, as the regulator’s arguments and criteria for determining whether a token or asset is a security could be applied to other stablecoin issuers. It is likely that the SEC will continue to take a hard stance on any companies or individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Terraform Labs and Do Kwon is a reminder that the regulator is willing to take action against companies and individuals who are found to be in violation of U.S. securities laws. The case serves as a roadmap of the SEC’s arguments and criteria they use to determine whether a token or asset is a security. It is likely that the SEC will continue to take a hard stance on any companies or individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Kwon and Terraform Labs is likely to have a wide-reaching impact on the crypto industry, as the regulator’s arguments and criteria for determining whether a token or asset is a security could be applied to other stablecoin issuers. It is likely that the SEC will take further action against companies and individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
Overall, the SEC’s lawsuit against Terraform Labs and Do Kwon serves as a reminder of the regulator’s willingness to take action against companies and individuals who are found to be in violation of U.S. securities laws. The case provides a roadmap of the SEC’s arguments and the criteria they use to determine whether a token or asset is a security. It is likely that the SEC will continue to take a hard stance on any companies or individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Kwon and Terraform Labs is likely to have a wide-reaching impact on the crypto industry, as the regulator’s arguments and criteria for determining whether a token or asset is a security could be applied to other stablecoin issuers. It is likely that the SEC will take further action against companies and individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Terraform Labs and Do Kwon is likely to have a lasting impact on the crypto industry, as the case serves as an example of the regulator’s willingness to take action against companies and individuals who are found to be in violation of U.S. securities laws. The case provides a roadmap of the SEC’s arguments and the criteria they use to determine whether a token or asset is a security. It is likely that the SEC will continue to take a hard stance on any companies or individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Kwon and Terraform Labs is likely to have a wide-reaching impact on the crypto industry, as the regulator’s arguments and criteria for determining whether a token or asset is a security could be applied to other stablecoin issuers. The case serves as a reminder that the SEC is willing to take action against companies and individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Terraform Labs and Do Kwon serves as an example of the regulator’s willingness to take action against companies and individuals who are found to be in violation of U.S. securities laws. The case provides a roadmap of the SEC’s arguments and the criteria they use to determine whether a token or asset is a security. It is likely that the SEC will continue to take a hard stance on any companies or individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Kwon and Terraform Labs is likely to have a wide-reaching impact on the crypto industry, as the regulator’s arguments and criteria for determining whether a token or asset is a security could be applied to other stablecoin issuers. It is likely that the SEC will take further action against companies and individuals who are found to be in violation of U.S. securities laws and will continue to use the Howey test to determine whether a token or asset is a security.
The SEC’s lawsuit against Terraform Labs and Do Kwon serves as a reminder of the regulator’s
