Judge Declares Terraform Labs' LUNA and MIR Tokens as Securities

• US Federal Judge Verdict: Terraform Labs Contravened Federal Security Laws
• Implications of the Summary Judgment
• Regulatory Assertions and the Court Ruling
• SEC's Legal Action Against Terraform Labs

US Federal Judge Verdict: Terraform Labs Contravened Federal Security Laws

A U.S. federal judge, Jed Rakoff, ruled on Thursday that Terraform Labs, the developer behind the unfortunate Terra and Luna cryptocurrencies, breached federal securities laws during the public sale of its cryptocurrencies. Judge Rakoff resides in the U.S. District Court for the Southern District of New York. In a summary judgment, the court discovered that Terraform Labs failed to register LUNA and MIR, another cryptocurrency within the Terra ecosystem, as securities.

Implications of the Summary Judgment

The summary judgment has the potential to influence a future trial regarding the securities violations of Terraform. Despite efforts from both parties to exclude the testimonies of opposing expert witnesses, who have examined the trading activity leading to UST's depegging in May 2022, Judge Rakoff denied these attempts. On the other hand, the judge barred two other defense witnesses, one intending to testify on Terraform's custodial wallets activity, and another set to provide the jury with an overview of Terraform's crypto economy.

Regulatory Assertions and the Court Ruling

The judgment is consistent with the regulators' claim that the majority of cryptocurrencies should be deemed as securities, therefore falling within their regulatory scope. However, the court's judgment solely acknowledges the SEC's authority to supervise two cryptocurrencies, Luna and Mir.

SEC's Legal Action Against Terraform Labs

The SEC took legal action against Terraform Labs earlier this year. This move followed a series of similar complaints the regulatory body lodged against several other significant figures in the cryptocurrency industry. The lawsuit was filed only a few months after the infamous depegging event of Terraform Labs' algorithmic stablecoin UST, which sent shockwaves throughout the crypto industry and ushered in a severe downturn.

Edited by Jonathan Stoker