A federal judge has sentenced cryptocurrency entrepreneur Do Kwon and his company Terraform Labs for violating US law by failing to register two digital currencies that collapsed in 2022. The ruling could have significant implications for the crypto industry. US District Judge Jed Rakoff sided with the US Securities and Exchange Commission (SEC) in a lawsuit related to the downfall of TerraUSD and Luna currencies.
The judge’s ruling denied summary judgment to both parties on the SEC’s fraud claims, setting the stage for a trial scheduled for January 29, 2024. However, the judge dismissed the SEC’s claims that the defendants illegally offered security-based swaps. Terraform Labs disagreed with the decision and vowed to continue defending against the “meritless” fraud claims during the upcoming trial.
TerraUSD, designed as a stablecoin, and Luna, a traditional token, experienced a collapse resulting in the loss of an estimated $40 billion or more. The SEC argued that these assets qualified as unregistered securities and accused Terraform Labs and Do Kwon of misleading investors about the stability of TerraUSD.
Judge Rakoff affirmed that the four crypto assets, including TerraUSD and Luna, met the definition of securities based on a 1946 US Supreme Court ruling. However, he acknowledged that reasonable jurors could differ in their interpretation of whether the defendants intended to defraud investors through multiple statements about Terraform Labs’ business.
The SEC’s remedies for selling unregistered securities will be determined once the defendants’ liability on the fraud claims is resolved. Do Kwon is also facing separate fraud charges filed by US prosecutors in Manhattan and has been contesting extradition to the United States since his arrest in March.
The outcome of the trial could significantly impact the broader cryptocurrency industry and shape the regulatory landscape and investor protections.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | Do Kwon, Jed Rakoff |
| Companies | Terraform Labs, US Securities and Exchange Commission (SEC) |
| Currencies | TerraClassicUSD, Terra Luna Classic |
| Securities | None |
