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US District Judge Jed Saul Rakoff stated on Thursday that Terraform Labs CEO and founder Do Kwon violated US securities law by failing to register UST and LUNA as securities.
Judge Rakoff, from the US District Court Southern District of New York, concurred with the Securities and Exchange Commission (SEC) that Terraform Labs conducted the offering and sale of unregistered securities, breaching Sections 5(a) and 5(c) of US securities law.
Additionally, the judge ruled that the SEC’s fraud case against Terraform will proceed to trial by jury next month. Section 5 mandates the registration of securities with the SEC before any sale or offer to sell such securities.
According to the SEC, Kwon orchestrated a scheme to deceive investors into believing that Chai was processing transactions on the Terra Blockchain, leading to numerous misrepresentations to investors and the public.
Recently, Judge Jed Rakoff sided with #Terraform on the claims involving offering and effecting transactions in security-based swaps.https://t.co/dGySdAWaR6
— CrowdWisdomLive (@CrowdWisdom360) December 29, 2023
However, the judge found Do Kwon and Terraform Labs guilty of violating U.S. law by failing to register two digital…
The SEC further alleges that “Kwon, on behalf of Terraform, engaged in deceptive conduct when he secretly made a deal with Jump to step in and restore the $1 peg for UST in exchange for modifying the terms of an agreement for Luna tokens.” In October, Do Kwon filed a motion for summary judgment against the SEC, seeking to dismiss allegations of multi-billion-dollar securities fraud.
Jump Trading Implicated in Terraform Labs Controversy
Documentation reveals that Do Kwon of Terraform Labs struck a deal with Jump Trading, implicating the trading firm in the controversy. The report alleges that “Kwon, on behalf of Terraform, engaged in deceptive conduct when he secretly made a deal with Jump to step in and restore the $1 peg [of UST] in exchange for modifying the terms of an agreement for LUNA tokens.”
Terraform Labs CEO Faces Legal Challenges Following $40 Billion Loss
The aftermath of a $40 billion loss in 2022 has positioned Terraform Labs ceo at the forefront of crypto firms grappling with challenges. Following the collapse of UST and LUNA, the Securities and Exchange Commission (SEC) sued Terraform Labs CEO and its founder Do Kwon, asserting that both the Anchor Protocol and the LUNA token are “crypto asset securities.” This led to allegations of selling unregistered securities and security-based swaps, resulting in violations of regulations.
Despite the legal turmoil that ensued, including Do Kwon’s arrest in Montenegro and extradition requests from both the U.S. and South Korea, Kwon recently achieved success in appealing his extradition ruling.
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