The SEC won the securities ruling over Terraform, Kwon

A U.S. district court upheld the SEC’s ruling against Terraform Labs in the crypto case, which will hold a jury trial on fraud charges.

A U.S. district court ruled in favor of the SEC against Terraform Labs and its former CEO, Do Kwon. This ruling, issued by District Court Judge Jed Rakoff, concluded that the entities were involved in the issuance and sale of unregistered securities, specifically targeting Crypto Assets LUNA and MIR.

Mixed Opinion on Securities-Based Swaps

However, the court made a nuanced view of securities-based swaps. The defendant obtained a favorable judgment in respect of the unregistered offer and sale of these swap products. The focus is on Terraform’s Mirror Protocol, which allows users to mint “mAssets” to mirror real-world assets on the Blockchain. The court disagreed with the SEC’s view that these mAssets constituted securities-based swaps and concluded that they did not meet the legal definition.

How to test the app

This ruling relied heavily on the Howey test to determine the nature of Auto-Invest. The court noted Kwon’s previous statement that the LUNA investors were actually investing money in a common venture in the expectation of profiting from the efforts of Terraform Labs and Kwon.

Similarly, MIRToken was assessed against the same criteria, and the Court concluded that Terraform did meet the Howey test due to the expectation of profits resulting from Terraform’s development efforts.

Expert Testimony: Determinants of Sexual Factors

Another key aspect of the case is the court’s position on expert testimony. At the same time, the court denied the SEC’s motion to exclude the testimony of defense expert Dr. Terrence Hendershott. As a result, the court allowed the testimony of SEC experts Dr. Bruce Mizrach and Dr. Matthew Edman, reinforcing the SEC’s position in the case.

**SEC Fraud Charges Will Go to Trial **

Despite these rulings, the court did not render either party’s summary judgment on the SEC’s fraud allegations against Terraform Labs and Kwon. The allegations, involving a fraudulent Crypto Assets scheme that allegedly wiped out more than $40 billion in Market Cap in 2022, will be tried in a jury trial. The selection of the jury is scheduled for January 24, 2024, marking the next stage in this high-profile legal battle.

This decision is significant in the ongoing efforts to focus on and regulate Crypto Assets and Blockchain businesses. The outcome of the ongoing jury trial will be closely watched as it could set a precedent for future cases in this fast-growing field.