Stuart Alderoty, Ripple’s CLO, Assesses the Impact of the Terraform Labs Ruling
U.S. Federal Judge Jed Rakoff made a significant ruling on December 28th in the Terraform Labs case, declaring Luna, MIR, and other crypto tokens as ‘securities.’ This groundbreaking decision, based on their identification as investment contracts, establishes a clear tone for the ongoing trial regarding security violations.
The judgment confirms the following:
Classification of Tokens:
UST, LUNA, wLUNA, and MIR are officially recognized as securities due to their inherent nature as investment contracts.
Legal Progression:
Despite this classification, the legal proceedings continue, as both parties’ requests for a summary judgment on fraud charges have been dismissed. The case will now proceed to a jury trial.
Insights from the trial include:
Testimonies from Witnesses:
The judge allowed witnesses from both sides to testify, while limiting the testimony of two defense witnesses who focused on Terraform’s custodial wallets and an overview of the crypto economy.
SEC’s Position:
The court’s decision aligns with the stance of the Securities and Exchange Commission (SEC), which asserts that most cryptocurrencies should be treated as securities under their oversight. It is important to note that this ruling specifically applies to Luna and Mir.
Recapping the Allegations:
SEC Charges:
In February, Terraform Labs, led by CEO Do Kwon, faced charges from the SEC, accusing them of orchestrating a “multi-billion dollar crypto asset securities fraud” through Terra USD.
Fundraising Strategies:
The SEC claims that Terraform Labs raised billions through unregistered transactions, including security-based swaps known as “mAssets” and the controversial Terra USD.
Looking Ahead:
Jury Trial Date:
A crucial moment awaits as the trial on fraud allegations is scheduled for January 24, 2024. Stay updated with Coinpedia for real-time information on this high-profile case.
This ruling signifies a pivotal moment in the Terraform Labs narrative, greatly influencing the discussion on the classification of crypto assets and the potential regulatory implications for the broader cryptocurrency landscape.