DEFIREGULATION

Do Kwon faces another accusation, US court rules: UST, MIR, and LUNA are unregistered securities

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Do Kwon faces another accusation, US court rules: UST, MIR, and LUNA are unregistered securities

The process of Terra founder Do Kwon's conviction has been quite lengthy, with Terra collapsing nearly a year before the SEC filed charges. In addition, Do Kwon had been on the run for some time before being extradited by the Montenegrin court, and is currently awaiting judgment in January next year. After 10 months! SEC sues Do Kwon, involving cryptocurrency securities fraud.

U.S. Court Rules: Terraform Labs and Do Kwon Sold Unregistered Securities

According to court documents, U.S. Southern District of New York Federal Judge Jed Rakoff issued a summary judgment on the 28th, including:

  • Terraform Labs and Do Kwon sold securities such as Luna and MIR that were not registered, violating federal securities laws

  • Tokens like UST, LUNA, wLUNA, and MIR were deemed to be investment contracts and fall under the definition of securities

Jed Rakoff pointed out that there is no dispute that UST, LUNA, wLUNA, and MIR are classified as securities and fully meet the definition of investment contracts.

However, he noted that mAssets do not meet all the definitions, especially when the price of mAssets exceeds the user's collateral, users must deposit additional collateral to avoid liquidation. In other words, users cannot profit simply by holding mAssets, and the collateral must always exceed the price of mAssets.

Judge's comments on mAssets

Terraform Labs Challenges the Judgment

A spokesperson for Terraform told Reuters that they strongly disagree with the ruling and do not believe their tokens are securities. They will continue to defend against the SEC's fraud charges in the trial.

This judgment is quite interesting in terms of regulatory development, as the U.S. court did not follow the precedent set by the Ripple case but instead analyzed the individual attributes of the tokens.

The next trial is scheduled for January 29th next year, and the judge has also rejected both parties' requests to exclude each other's expert witnesses, allowing expert witnesses to attend the next trial.

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