In The Terraform Labs Case, a Judge Rules In Favor Of The SEC And Declares LUNA And MIR Tokens To Be Unregistered Securities

Judge Jed Rakoff, who is supervising the case between the US Securities and Exchange Commission (SEC) and Terraform Labs and former CEO Do Kwon, has reportedly rendered a summary judgment in favor of the regulatory agency, as reported by Blockworks. According to the ruling, Kwon and Terraform engaged in the sale and purchase of unregistered securities, with a specific emphasis on LUNA and MIR tokens. The SEC alleged that the defendants conducted transactions involving unregistered security-based swaps and engaged in fraudulent schemes with the intent to mislead investors.

Rakoff wrote that since UST, LUNA, wLUNA, and MIR are investment contracts, there is no legitimate dispute that they are securities. In addition, he determined that Howey's definition of an investment contract constitutes a legally binding statement. Rakoff determined, in accordance with the Howey test, that UST, wLUNA, the previously mentioned LUNA, and MIR are investment contracts. The trial will now center on the SEC's allegations of fraud against Terraform and Kwon.

In February, the SEC filed its accusations. Regarding the endeavors of Terraform to develop its blockchain, Rakoff asserts that investors were misinformed by Kwon's recurrent assurances. The SEC had requested that the judge render a verdict regarding the securities claims in order to preempt their deliberation by a jury during the trial's final phase. The filing verifies that jury selection will commence on January 24, and the trial itself will commence on January 29. Furthermore, the court rejected both the defendants' and the SEC's motions to exclude two and one expert for the defense, respectively. In contrast, Judge Rakoff granted the SEC's motion to exclude Dr. Christine Parlour and Raj Unny, two additional defense experts.