Court backs SEC in Terraform Labs case

The Southern District of New York court встал on the side of the United States Securities and Exchange Commission (SEC) in the lawsuit against Terraform Labs (TFL) and its founder Do Kwon.

As part of the summary judgment, Judge Jed Rakoff found that the company offered and sold unregistered securities in the form of UST, LUNA, wLUNA and MIR. In his view, the defendants failed to present arguments to the contrary, and the MIR tokens “passed the Howey test” with flying colours.

Meanwhile, fraud claim will be heard by a jury — both sides’ motions for a ruling under the summary-judgment procedure were denied. The first hearing is set for January 24, 2024.

In addition to the United States, the South Korean authorities filed charges against Kwon. The allegations include, among other things, violations of capital markets laws.

On March 23, the Montenegro police arrested Kwon and former Terraform Labs chief financial officer Han Chang-joon while attempting to depart Podgorica airport for Dubai using counterfeit passports.

The former head of TFL was placed under house arrest, and in June he was sentenced to four months in prison for document forgery.

Earlier in November, the High Court of Montenegro approved extradition of Kwon to the United States or South Korea, but a month later the appellate court reversed the ruling.