crypto.news
A U.S. federal judge has ruled in favor of the Securities and Exchange Commission (SEC) in a case against Terraform Labs and its former CEO Do Kwon.
According to a U.S. court’s decision, Terraform Labs and Do Kwon sold two unregistered securities, referring to the LUNA, UST, and MIR tokens. District Court Judge Jed Rakoff made the decision on Dec. 28.
The court cited Kwon’s previous commentary, which stated that LUNA holders simply need to “[s]it back and watch [him] kick-ass” to conclude that LUNA meets the Howey test.
Concerning the MIR token, the court held that the defendants could not seriously dispute that they caused MIR holders to expect profits from a joint enterprise based on Terraform’s efforts to develop, maintain, and evolve the Mirror Protocol.
“In other words, that MIR passes the Howey test with flying colors.”
Court’s filing
In February, the SEC sued Terraform Labs and Do Kwon, alleging they raised billions of dollars from investors by selling them securities under the guise of cryptocurrencies. In a lawsuit filed in the Southern District of New York, the regulator claimed that Terraform sold investors securities under the guise of crypto assets, promising that the tokens would increase in value.
Beginning in April 2018, Kwon raised billions of dollars from investors by selling them Terraform-issued cryptocurrencies and various other digital assets, many of which were unregistered securities, the SEC alleges. The lawsuit says Kwon misled investors about the stability of UST and claimed that his company’s tokens would increase in value.
Do Kwon is now awaiting a court decision in Montenegro. At the beginning of December 2023, information appeared that Montenegro was planning to extradite Do Kwon to the United States. That decision however still needs to be confirmed by a Montenegrin court, which overturned a decision to extradite Kwon on Dec. 19.