A US judge recently presided over a hearing to examine if Terraform Labs’ digital assets should be called securities. This question is crucial in the ongoing lawsuit against the corporation and its founder. The Securities and Exchange Commission (SEC) brought up this case.
Terraform Labs, led by Kwon, created two coins that caused a big disturbance in the cryptocurrency market. Last year, these two cryptocurrencies produced significant market volatility. They are now requesting that the SEC’s allegations be dismissed. According to the claims, they cheated investors by selling billions of dollars in unregistered securities.
One of these cryptocurrencies in question is TerraUSD, which you’ve probably heard of. TerraUSD is an algorithmic stablecoin designed to be tied to the US dollar’s value. Its value is derived from another token known as Luna.
However, both coins lost value when TerraUSD fell below its targeted dollar peg. TerraUSD had a market capitalization of more than $18.5 billion prior to the massive collapse. TerraUSD became one of the most popular cryptocurrencies at the time as a result.
The SEC claims that Terraform Labs and Kwon deceived investors regarding TerraUSD’s soundness. Furthermore, they erroneously promised that the value of their crypto tokens will rise.
NEWS: 🔍 U.S. judge weighs if Terraform Labs’ cryptos are #securities in SEC case ⚖️
— Walletor (@walletorapp) June 16, 2023
During the hearing, US District Judge Jed Rakoff highlighted reservations about the platform’s so-called Anchor protocol. This protocol provided returns of up to 20% on TerraUSD deposits. He said that this appeared to be a securities contract rather than anything else.
By July 14, the judge is likely to rule on the motion to dismiss the case. The outcome of this decision will have far-reaching consequences for the regulatory environment of cryptocurrencies. Especially in light of their ongoing legal challenges and categorization as securities.
Finally, the US judge’s decision on whether Terraform Labs’ cryptocurrency is securities represents a watershed moment. It emphasizes the significance of the SEC’s fraud investigation into the company and its founder. The decision will shed light on the legal standing of these digital assets and may have an impact on the blockchain industry’s future.