The U.S. Securities and Exchange Commission (SEC) is demanding a summary judgment on all claims against Do Kwon and Terraform Labs following alleged breaches.
The agency also seeks to forego a full trial due to a clear set of undisputed facts in its lawsuit. It argues that the pooling of funds in a collective venture, with profits expected mainly from the promoters’ endeavors, meets the criteria of the Howey test, thereby classifying it as a security under federal law.
Terraform and Kwon are accused of deceiving investors about the stability of TerraUSD (UST) stablecoin. In their assessment, the regulator claims that UST’s price stability resulted from undisclosed third-party interventions, making previous statements about the algorithm’s effectiveness misleading.
Do Kwon’s lawyers previously appealed to the court, arguing that the SEC had not adequately demonstrated that securities were being offered.
Do Kwon is presently incarcerated in Montenegro on charges of document forgery following his arrest for possession of fake passports.
Terraform’s co-founder, Daniel Shin, has distanced himself from the debacle, attributing the downfall of Terraform Labs to Kwon’s mismanagement. He emphasized disengagement from the company’s operations two years before its failure.
The ongoing legal drama continues to cast a shadow over the Terra ecosystem, with the prices of Terra (LUNA) and Terra Classic (LUNC) falling in the past day. This has contributed to the wariness among investors regarding the Terra ecosystem tokens amidst the broader context of price volatility.