Key Points:
- A US federal judge denied Terraform Labs’ request to dismiss Terraform Labs’ lawsuit with the SEC.
- The judge also argued that he disagreed with the approach taken in the SEC case against Ripple.
- This decision could cause the SEC to reverse course to appeal the case against Ripple.
According to CoinDesk, US Federal Judge Jed Rakoff of the Southern District of New York dismissed Terraform Labs’ request to dismiss the US Securities and Exchange Commission (SEC) charges on Monday.
The judge said that the SEC has fully demonstrated its authority and “has made a reasonable recommendation” that TerraUSD (UST) and LUNA may have violated securities laws.
Additionally, Jed Rakoff rejected the judgment of Judge Analisa Torres, who recently ruled that Ripple Labs offers XRP to retail investors on the secondary market and does not violate securities laws.
Judge Rakoff does not distinguish between cryptocurrencies based on how they are sold. For him, selling directly to large institutional investors or through a 3rd party to retail investors – does not affect whether those tokens are considered securities or not.
“But Howey makes no such distinction between purchasers. And it makes good sense that it did not. That a purchaser bought the coins directly from the defendants or, instead, in a secondary resale transaction has no impact on whether a reasonable individual would objectively view the defendants’ actions and statements as evidencing a promise of profits based on their efforts.”
He said.
Prior to that, during a hearing on Thursday, June 15, representatives of Terraform Labs faced the United States Securities and Exchange Commission (SEC) in a Manhattan court to prove that the public-owned cryptocurrency issuer is not a security.
At yesterday’s hearing, Dentons, a law firm representing Terraform Labs against the SEC, presented new documents supporting their petition to dismiss the securities commission lawsuit.
The SEC challenged Dentons’ efforts, saying the documents, which included internal SEC emails and other important information, were irrelevant. The regulator reiterated that the collapsed algorithmic stablecoin of Terraform UST should be treated as a security.
In stark contrast to Judge Torres’ ruling with Ripple. These are two different lawsuits. Jed Rakoff’s ruling will not change the results already from the Ripple case, but this could be the basis for the SEC to take decisive appeal actions in the Ripple case.
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