The US District Court sided with the SEC against Terra Labs in the high-profile crypto case. It did, however, put the jury trial into the fraud allegations on hold.
Mixed decision on security-based swaps
The United States District Court ruled in favor of the Securities and Exchange Commission (SEC) against Terra Labs and its former CEO Do Kwon. This ruling by District Court Judge Jed Rakoff concluded that the entities in question were clearly involved in the offer and sale of unregistered securities targeting the LUNA and MIR cryptocurrencies.
However, the court took a nuanced view on security-based swaps. Defendants obtained a favorable decision regarding the unregistered offer and sale of these swaps. The focus is on Terra Labs’ Mirror Protocol, which allows users to mint “mAssets” that reflect real-world assets on the blockchain. The court disagreed with the SEC’s view that these mAssets constitute security-based swaps. He concluded that they did not meet the legal definition.
Court’s Terra decision based on Howey Test
The decision relies heavily on the Howey test to determine the nature of investments. The court draws attention to a statement made by Kwon earlier. In this vein, he notes that LUNA investors are effectively putting their money into a joint venture with the expectation of profiting from Terraform Labs and Kwon’s efforts. Similarly, it evaluates the MIR token under the same criteria. The court notes Terra Labs’ expectation of profit from its development efforts. Therefore, he concludes that it does indeed meet the Howey test.
Expert testimonies: A decisive element
Another critical aspect of the case was the court’s attitude towards expert testimony. SEC defense expert Dr. Terrence Hendershott’s request that his statement not be taken was rejected. However, the court ruled that the SEC’s experts, Dr. Bruce Mizrach and Dr. He allowed Matthew Edman’s statements to be taken. Thus, it strengthened the SEC’s position in the case.
SEC’s About Terra Fraud allegations await hearing
Despite these rulings, the court did not grant summary judgment to either party on the SEC’s fraud claims against Terraform Labs and Kwon. These claims, which allegedly involve a fraudulent cryptocurrency scheme that wiped out over $40 billion in market value in 2022, are set for a jury trial. The program calls for jury selection on January 24, 2024. It marks the next phase in this high-profile legal battle that imminently involves the Terra ecosystem.
cryptokoin.comAs you follow from , this decision is very important for the crypto world. Because it reflects ongoing scrutiny and regulatory efforts surrounding cryptocurrencies and blockchain businesses. The outcome of the likely pending jury trial will set a precedent for future cases in this rapidly evolving field. Therefore, the cryptocurrency community will be watching closely.
To be informed about the latest developments, follow us twitter‘in, Facebookin and InstagramFollow on and Telegram And YouTube Join our channel!