US Judge Considers Terraform Labs For Securities Infringement In Latest Hearing
- A US judge considers whether Terraform Lab’s cryptocurrency is security during a hearing on Thursday.
- Previously, the SEC had complained that Terraform Labs and DoKwon violated securities laws and misled investors about the stability of the UST.
- Terraform Labs and Kwon argue that the case should be dismissed because its digital assets do not fit the definition of security, and the SEC lacks jurisdiction over the industry.
US District Judge Jed Rakoff in Manhattan considered whether digital assets created by Terraform Labs (TerraUSD and Luna) are securities at a hearing on Thursday.
During the hearing, Rakoff questioned whether the so-called Anchor protocol offered by Terraform Labs (which offers returns up to 20% on TerraUSD deposits) should be considered a security.
Terraform Labs and Do Kwon argued that the case should be dismissed because its digital assets do not meet the definition of security, and the SEC lacks jurisdiction over the industry.
“We’re not doing anything new here,” said SEC attorney Devon Staren at the hearing. “We are simply applying the securities laws.”
Near the end of the hearing, the SEC emphasized that it wasn’t necessarily the tokens themselves but the broader ecosystem of which they were part that aided its analysis. Regarding Mirror Protocol assets, the SEC’s Staren said that the regulator did not accuse the support of being securities-based swaps but that the transactions they were involved in were.
Judge Rakoff said he would announce a ruling on the motion to dismiss on or before July 14.
Kwon and Terraform Labs are behind two cryptocurrencies that exploded in crypto markets worldwide last year. They asked US District Judge Jed Rakoff in Manhattan to dismiss an SEC lawsuit accusing them of defrauding investors and selling billions of dollars in digital assets as unregistered securities. TerraUSD, an algorithmic stablecoin that maintains a 1:1 ratio to the US dollar, received its value through another paired token called Luna.
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