The United States District Court has ruled in favor of the Securities and Exchange Commission (SEC) against Terraform Labs and its former CEO, Do Kwon. This decision, issued by District Court Judge Jed Rakoff, <\/span>concludes<\/span><\/a> that the entities were involved in the offering and selling of unregistered securities, explicitly targeting the cryptocurrencies LUNA and MIR.<\/span><\/p>\n However, the court presented a nuanced view on security-based swaps. The defendants received a favorable judgment regarding these swaps\u2019 unregistered offer and sale. The focus was on Terraform\u2019s Mirror Protocol, which allowed users to mint \u201cmAssets,\u201d mirroring real-world assets on the blockchain. The court <\/span>disagreed<\/span><\/a> with the SEC\u2019s view that these mAssets constituted security-based swaps, concluding they did not meet the legal definition.<\/span><\/p>\n <\/p>\n The ruling heavily relied on the Howey test to determine the nature of the investments. The court noted a previous statement from Kwon, indicating that LUNA investors were effectively putting their money in a common enterprise with expectations of profits from the efforts of Terraform Labs and Kwon.\u00a0<\/span><\/p>\n Similarly, the MIR token was judged under the same criteria, with the court concluding that it indeed <\/span>satisfies<\/span><\/a> the Howey test due to the expectation of profits driven by Terraform\u2019s developmental efforts.<\/span><\/p>\n <\/p>\n Another critical aspect of the case was the court\u2019s stance on expert testimonies. Concurrently, the SEC\u2019s motion to exclude the testimony of defense expert Dr. Terrence Hendershott was rejected. However, the court allowed the depositions of the SEC\u2019s experts, Dr. Bruce Mizrach and Dr. Matthew Edman, reinforcing the SEC\u2019s position in the case.<\/span><\/p>\n <\/p>\n Despite these rulings, the court did not grant summary judgment for either party on the SEC\u2019s <\/span>allegations<\/span><\/a> of fraud against Terraform Labs and Kwon. These claims, involving an alleged fraudulent cryptocurrency scheme that erased over $40 billion in market value in 2022, are set for a jury trial. The jury selection is scheduled for January 24, 2024, marking the next phase in this high-profile legal battle.<\/span><\/p>\n This decision is significant in the ongoing scrutiny and regulatory efforts surrounding cryptocurrencies and blockchain enterprises. The outcome of the pending jury trial will be closely watched, as it could set precedents for future cases in this rapidly evolving field.<\/span><\/p>\n Read Also:<\/b> Ark Invest, 21Shares File Another Amendment To Bitcoin ETF Filing<\/span><\/a><\/p>\nMixed Verdict on Security-Based Swaps<\/h2>\n
Application of the Howey Test<\/h2>\n
Expert Testimonies: A Decisive Element<\/h2>\n
SEC\u2019s Fraud Claims Pending Trial\u00a0<\/strong><\/h2>\n
![\"coingape\"](\"https:\/\/cdn.coingape.com\/wp-content\/uploads\/2023\/08\/14164721\/x-logo.png\"){kind=logo}
![\"\"](\"https:\/\/secure.gravatar.com\/avatar\/619e02617eb852ad0eef520ae989a259?s=200&d=mm&r=g\"\/)
![\"\"](\"https:\/\/secure.gravatar.com\/avatar\/619e02617eb852ad0eef520ae989a259?s=200&d=mm&r=g\")