Follow Us

Judge Supported US SEC, Says Terraform Labs’ Do Kwon Violated Law 

Share on facebook
Share on twitter
Share on linkedin

Share

Judge Supported US SEC, Says Terraform Labs’ Do Kwon Violated Law 
Share on facebook
Share on twitter
Share on linkedin

The U.S. District Judge Jed Rakoff in Manhattan supported the Securities and Exchange Commission in its case arising from not registering TerraUSD and Luna currencies by Terraform. Both the currencies collapsed in 2022.

U.S. District Judge Jed Rakoff denied summary judgment to both sides on the SEC’s fraud claims, which will proceed toward a scheduled January 29, 2024 trial. He dismissed claims made by the SEC that the defendants illegally offered security-based swaps.

What did SEC claim and How Did Terraform React?

SEC claims that the two currencies are securities and the firm did not register them, which is against the laws. To this, Terraform spokesperson said that the company is against the fraudulent charges made by the SEC and they do not consider that the two currencies (TerraUSD and Luna) are securities. However, the SEC had no immediate comment.

The U.S. prosecutors in Manhattan also charged Kwon, a South Korean native, with fraud. He has designed TerraUSD which is a stablecoin made to maintain a constant price of $1. He also designed Luna, a traditional token whose value fluctuated but was closely linked to TerraUSD.

Kwon has been fighting extradition to the United States from Montenegro, where he was arrested in March, before the declaration of criminal fraud charges.

Both the cryptocurrencies lost an estimated $40 Billion. Their collapse dragged down the value of cryptocurrencies, including Bitcoin. The SEC asserted that TerraUSD and Luna were unregistered securities because they qualify as investment contracts.

The judge said that after the resolution of the liability on the fraud claims, the remedy for the sale of unregistered securities would be decided. On the other hand, the cryptocurrency industry has passionately decided that its tokens qualify as securities. 

In July, the Manhattan federal court said that some tokens sold by Ripple Labs do not qualify as securities because the purchasers did not know if their money went to third pirates or Ripple.

Rakoff said there was no genuine dispute that four crypto assets were securities under a U.S. Supreme Court decision defining investment contracts.

Summary

The SEC claimed that Kwon and Terraform Labs managed a fraud that involved the development, marketing, and sale of various cryptocurrencies. The District judge ruled in favor of SEC on claims that the Lab and DO Kwon offered and sold these two unregistered securities. SEC also claimed that Kwon engaged in a scheme to deceive investors about the nature and security of UST’s $1.00 peg.

Leave a Reply

Your email address will not be published. Required fields are marked *

Download our App for getting faster updates at your fingertips.

en_badge_web_generic.b07819ff-300x116-1

We Recommend

Top Broker

Top Rated Cryptocurrency Exchange

-
00:00
00:00
Update Required Flash plugin
-
00:00
00:00