Judge Rakoff sides with the SEC in the Terraform Labs case
Judge Jed Rakoff of the United States District Court granted summary judgment in favor of the SEC. The judge supports the SEC’s claim that Terraform Labs and its co-founder Do Kwon offered and sold unregistered securities.
The focus of this case revolves around the tokens LUNA and MIR. The judgment clarified that UST, LUNA, wLUNA, and MIR are considered ‘investment contracts’ and therefore securities under the law.
‘There is no real dispute that UST, LUNA, wLUNA, and MIR are securities because they are investment contracts,’ stated Judge Jed Rakoff.
The American regulator also argued that Kwon and Terraform Labs engaged in swaps transactions without registering them in compliance with regulatory requirements. However, the court rejected these arguments. Judge Rakoff ruled in favor of the defendants when it came to these specific allegations.
Additionally, the court denied Terraform Labs and Do Kwon’s request to exclude the testimony of two SEC experts, Dr. Bruce Mizrach and Dr. Matthew Edman, from the case.
Another trial scheduled for January
The judgment indicates that the fraud allegations brought by the SEC against Terraform and Kwon will be addressed in the upcoming trial, set to begin on January 29.
As a reminder, in February, the U.S. Securities and Exchange Commission (SEC) filed charges against Terraform Labs and its CEO, Do Kwon, in connection with their algorithmic stablecoin, Terra USD (UST). The SEC accuses Do Kwon of orchestrating a fraudulent scheme that resulted in the loss of at least $40 billion in market value in 2022.
