- The SEC won summary judgment against Terraform Labs for unregistered securities related to TerraUSD stablecoin, LUNA, wLUNA, and MIR.
- Judge Rakoff ruled these crypto assets were unregistered securities that required SEC registration, which Terraform failed to do.
- While fraud claims are still pending, the summary judgment establishes liability for Terraform and reinforces the SEC’s position that cryptocurrencies can be securities.
The Securities and Exchange Commission (SEC) has scored a major victory against Terraform Labs, the company behind the failed Terra stablecoin. On Thursday, Judge Jed Rakoff in the US District Court for the Southern District of New York granted the SEC summary judgment on its claim that Terraform Labs and its CEO Do Kwon offered and sold unregistered securities.
Background on the SEC Charges Against Terraform Labs
In February 2022, the SEC charged Terraform Labs and Do Kwon for orchestrating a multi-billion-dollar crypto asset securities fraud. The SEC accused Terraform Labs of offering and selling an interconnected suite of crypto asset securities, including the TerraUSD stablecoin, without proper registration.
Judge Rules Terraform’s Coins Were Unregistered Securities
Judge Rakoff ruled there was no genuine dispute that TerraUSD (UST), LUNA, wrapped LUNA (wLUNA), and MIR were securities. As investment contracts, they required registration with the SEC, which Terraform failed to do.
The judge denied both sides’ motions for summary judgment on fraud claims. Those claims will now proceed to a jury trial set to begin on January 24, 2024.
What This Means for Terraform Labs
The summary judgment hands the SEC a clear victory on a major part of its case against Terraform Labs. The judge validated the SEC’s argument that Terraform sold securities without proper registration.
While fraud claims are still pending, the summary judgment ruling establishes liability on the part of Terraform Labs and exposes the company to potential penalties. It also reinforces the SEC’s position that many cryptocurrencies are securities requiring compliance with securities laws.
The high-profile SEC case against Terraform Labs could have significant implications for the broader cryptocurrency industry as regulators ramp up enforcement of securities laws in the space.
