Judge Rules in Favor of SEC in Terraform Labs Case, Asserts LUNA and MIR Tokens as Unregistered Securities

According to Blockworks, Judge Jed Rakoff, who is overseeing the US Securities and Exchange Commission's (SEC) case against Terraform Labs and former CEO Do Kwon, has granted a summary judgment in favor of the regulatory agency. The judgment states that both Kwon and Terraform offered and sold unregistered securities, focusing on LUNA and MIR tokens. The SEC argued that the defendants engaged in fraudulent schemes to mislead investors and conducted transactions in unregistered security-based swaps. Rakoff wrote that there is no genuine dispute that UST, LUNA, wLUNA, and MIR are securities because they are investment contracts. He further ruled that Howey's definition of an investment contract is a binding statement of the law. Rakoff found that UST, wLUNA, and the aforementioned LUNA and MIR are investment contracts under the Howey test. The trial will now focus on the fraud claims that the SEC brought against Terraform and Kwon. The SEC filed its charges in February. Rakoff said that Kwon's repeated statements led investors to believe that they could make a profit due to the efforts of Terraform to develop its blockchain. The SEC had asked for the judge to grant a judgment on the securities claims to prevent them from being decided by a jury when the case ultimately proceeds to the courtroom. The filing confirms that jury selection is set to begin on Jan. 24, with the actual trial beginning Jan. 29. Additionally, the court denied a motion from the defendants to exclude two SEC experts, and a motion from the SEC to exclude one expert for the defense. Judge Rakoff did, however, grant the SEC's motion to exclude two other defense experts: Raj Unny and Dr. Christine Parlour.