The Terraform Labs case, which began in February, reached a significant milestone on December 28 with the issuance of summary judgment by U.S. Federal Judge Jed Rakoff. The ruling sets the trajectory for an ongoing security breach trial by classifying Terraform Labs’ Luna, MIR and other crypto tokens as ‘securities.’
Judgment overview
Judge Rakoff’s order states, “There is no genuine objection that UST, LUNA, wLUNA, and MIR are investment contracts and therefore securities.” This declaration supports the position of the U.S. Securities and Exchange Commission (SEC) and sets the stage for potential regulatory implications for related crypto tokens.
Continue trial
This ruling is a significant step forward, but the legal battle is not over yet. The parties’ motions for summary judgment on the fraud charges and other claims are denied. The trial is scheduled to proceed, and the jury will now be tasked with navigating the complexities of the case.
Trial decision highlights
In addition to summary judgment, the judge allowed testimony from witnesses on both sides but excluded two defense witnesses who focused on Terraform’s managed wallets and an overview of the broader crypto economy. The ruling is generally consistent with the SEC’s view that cryptocurrencies should be considered securities and subject to regulatory oversight. However, the court’s decision specifically placed Luna and Mir under SEC supervision.
Summary of Charges
Last February, the SEC indicted Terraform Labs and CEO Do-kwon Kwon on charges of “multi-billion dollar cryptocurrency securities fraud.” The accusation was that Terraform Labs allegedly orchestrated the fraud through Terra USD, an algorithmic stablecoin that suffered a dramatic collapse. The SEC alleged that the company raised billions of dollars through unregistered transactions involving a suite of crypto-asset securities, including “mAssets” and Terra USD.
Future trial date
The focus now shifts to the impending jury trial on the fraud charges, scheduled for January 24, 2024. This trial date promises further revelations and insight into the alleged wrongdoings of Terraform Labs and its key figures.