Court documents show that according to the SEC, Kwon and Terraform Labs ‘organized a multi-billion-dollar scheme entailing the creation, marketing, and sale of different cryptocurrencies.
A U.S. federal judge has ruled in the Securities and Exchange Commission’s (SEC’s) favor concerning assertions that Terraform and Do Kwon, its ex-CEO, provided and sold two unregistered securities. In a December 28 filing, Jed Rakoff, a District Court Judge, gave summary judgment in the SEC’s favor.
Terraform Labs Issued Unregistered Securities
The regulator contended that Terraform Labs and Kwon Labs provided and sold UST, LUNA, and MIR unregistered securities. Nevertheless, the judge granted summary judgments for the accused over the supposed unregistered offer as well as the sale of security-founded swaps.
The Securities and Exchange Commission claimed that by developing and maintaining the Mirror Protocol via which other individuals could mint ‘mAssetsm,’ Terraform Labs and Kwon gave and carried out transactions in security-founded swaps. However, the court dismissed this claim by stating that mAssets fail to meet the legal definition of a security-founded swap.
M-Assets refer to blockchain assets that function as symbols of actual-world assets by depicting on-chain exchange prices. The court highlighted an earlier comment from Kwon, asserting that LUNA holders are just required to ‘sit back and witness him prevail’ to show that LUNA met the Howey test requirements.
MIR Token Satisfies Howey Test Requirements
Simply put, the court ruled that an individual could place their ‘money in a common enterprise’ and be ‘convinced to anticipate profits from the promoter’s or a third party’s efforts,’ which in this case was Terraform and Do Kwon.
Concerning the MIR token, the court said the offenders could not expressly deny that they convinced holders to anticipate returns from a common enterprise founded on Terraform’s initiatives to create, maintain, and expand the Mirror Protocol.
Unlike in SEC case versus Ripple Labs, the regulator score big as MIR token satisfied Howey Test requirements.
Simply put, the MIR scores highly in the Howe Test. Besides, the court rejected the motion by Terraform Labs and Kwon to strike out the evidence of Dr. Matthew Edman and Dr. Bruce Mizrach, two Securities and Exchange Commission experts. It also denied the SEC’s motion to ban the evidence of Dr Terrence Hendershott, a defense expert.
SEC Alleges Deceitful Kwon Run Scheme to Defraud $40 Billion
According to the Securities and Exchange Commission, Kwon planned a deceitful cryptocurrency scheme that resulted in the wiping out of at least $40B of market value last year. Nevertheless, the court rejected the two sides’ motion for summary judgment concerning the Securities and Exchange Commission’s fraud allegations.
Starting in January, a jury trial will decide on the fraud assertions. Jury selection will happen on January 24 next year.
According to a Terraform Labs representative, they dispute the verdict and are ready to ‘fiercely’ defend the fraud allegations by the Securities and Exchange Commission at trial. Specifically, he said they strongly oppose the verdict and do not consider UST stablecoin or other tokens under consideration as securities.
Additionally, the SEC failed to provide evidence to back its fraud accusations. As such, they will continue defending against the worthless accusations at trial.
SureTradeGroup.com is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Some of the content on this site is paid content that is not written or posted by our writers or editors and the opinions expressed do not reflect the opinions of this website. Any disagreement you may have with brands or companies mentioned in articles will need to be taken care of directly with those specific brands and companies. The responsibility of anyone who may click links in our articles and ultimately sign up for that product or service is their own. Forex, Stocks, Cryptocurrencies, NFTs and Dogital Tokens are all a high-risk asset, investing in them can lead to losses. Readers should do their own research before taking any action.