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According to the most recent sources, a U.S. judge debated whether or not to classify the digital assets of the defunct Terraform Labs as securities. The new information is at the centre of the case filed by the U.S. Securities and Exchange Commission (SEC) against Terraform Labs and Do Kwon, the company's founder.
According to the reports, Do Kwon and Terraform Labs asked for the action against them by the U.S. SEC to be dismissed because they allegedly failed to "provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD." They appeared before Manhattan's U.S. District Judge Jed Rakoff and entered a plea.
During the proceedings, Judge Rakoff voiced uncertainty about the Anchor protocol offered by Terraform Labs being categorised. He questioned the appropriateness of classifying this offer, which promised returns of up to 20% on TerraUSD investments, as a security.
He declared You developed it, and only those who had already made the first step could benefit from it. At that point, I fail to see why that isn't a securities contract.
Due to the fact that their digital assets do not match the requirements for securities, Terraform Labs and Kwon believe that the case should be dismissed and that the SEC lacks authority over the sector. Judge Rakoff stated that he would rule on the case's dismissal request by July 14, 2023.
A depeg from the United States occurred last year, which caused volatility for Terra's stablecoin Terra USD (UST). On May 7, a terrible chain of events occurred that quickly reduced its worth to almost nothing. The value of the LUNA token also fell as a result of this incident. Do Kwon, the founder of Terraform Labs, is being detained in both the US and South Korea. However, he is currently free on bond in Montenegro after obtaining the court's blessing for his bail request.
