Judge sides with US SEC, says Terraform Labs crypto founder Do Kwon violated law
channelnewsasia.comNEW YORK: A federal judge ruled on Thursday (Dec 28) that cryptocurrency entrepreneur Do Kwon and his company Terraform Labs violated United States law by failing to register two digital currencies that collapsed in 2022.US District Judge Jed Rakoff in Manhattan sided with the Securities and Exchange Commission in its case stemming from the implosion of the TerraUSD and Luna currencies.Rakoff also denied summary judgment to both sides on the SEC's fraud claims, which will proceed toward a scheduled Jan 29, 2024 trial.
He dismissed SEC claims that the defendants illegally offered security-based swaps.A Terraform spokesman said the company strongly disagreed with the decision, did not believe its tokens were securities, and would continue defending against the SEC's "meritless" fraud claims at trial.The SEC had no immediate comment.Kwon, a South Korean native, has also been charged with fraud by US prosecutors in Manhattan.He has been fighting extradition to the United States from Montenegro, where he was arrested in March several hours before the criminal fraud charges were announced.Kwon had designed TerraUSD, a "stablecoin" designed to maintain a constant US$1 price, and Luna, a more traditional token whose value fluctuated but was closely linked to TerraUSD.Both cryptocurrencies lost an estimated US$40 billion or more when TerraUSD proved unable in May 2022 to maintain its US$1 peg.Their collapse also dragged down the value of other cryptocurrencies, including bitcoin.The SEC contended that four of the defendants' crypto assets, including TerraUSD and Luna, were unregistered securities because they qualified as "investment contracts".It also accused Terraform and Kwon of repeatedly misleading investors about the stability of TerraUSD, including by claiming that their cryptocurrencies would increase in value.In a 71-page decision, Rakoff said there was "no genuine dispute" that the four crypto assets were securities under a 1946 US Supreme Court decision defining
