SEC hopes to cite Terraform Labs ruling in seeking victory in Binance and Coinbase cases

The U.S. Securities and Exchange Commission (SEC) filed motions in two courts on January 3, seeking judges to reference a previous summary judgment regarding Terraform Labs in its lawsuits against exchanges Binance and Coinbase. The SEC claims that BUSD and UST are both securities, citing them in support of the case involving Coinbase selling unregistered securities.

SEC Cites Terraform Labs Case

According to documents filed by the SEC in the New York State Court yesterday, the SEC referenced a recent summary judgment by the Southern District Court of New York against Terraform Labs last week. The purpose of this reference is to support the SEC's lawsuit against Coinbase.

Just last Thursday, Judge Jed Rakoff ruled in the Terraform Labs case that Terraform Labs and its founder Do Kwon were suspected of issuing and selling unregistered securities in the form of cryptocurrencies, including UST, LUNA, wLUNA, and MIR. This summary judgment is seen as an initial victory for the SEC.

Therefore, the SEC submitted this ruling in the case against Coinbase, believing that its content is relevant to evaluating certain issues in the case:

Every cryptocurrency issuer may attract investors, including users of platforms like Coinbase, who expect the value of their investment to increase, which fits the definition of a security.

The SEC also cited tokens like SOL, ADA, and MATIC, claiming that they, like UST, are unregistered securities.

Polygon MATIC, Solana SOL, Cardano ADA Respond to Securities Allegations in Three Ways

In other words, the SEC hopes that through this ruling, it can support its claim that Coinbase, as a secondary market for cryptocurrencies, is involved in assisting in the sale of unregistered securities.

SEC: Both BUSD and UST Are Securities

Furthermore, the SEC also submitted the same ruling to the Washington court, which is responsible for hearing its lawsuit against the exchange Binance.

The document states:

The previous court's view on the defendant Terraform's so-called "stablecoin" UST is highly relevant to the current issues surrounding the defendant Binance's "stablecoin" BUSD, collateral services, BNB Vault, and products like Simple Earn.

It further adds, "BUSD should be considered a security just like UST."

The SEC argues that the Terraform Labs ruling can provide further basis for Judge Amy Jackson to reject the motion previously filed by Binance.

Previously, Binance and its former CEO CZ had submitted a motion to dismiss in September, arguing that the SEC had exceeded its regulatory authority and exerted excessive power, while also retroactively expanding the standards and definitions of securities.

SEC Enforcement Director: Crypto Crackdowns Are Taking Effect

In response to the SEC's repeated enforcement actions in the crypto space, SEC Enforcement Director Gurbir Grewal claimed in an interview with the Wall Street Journal:

The multiple enforcement actions and accompanying penalties over the past two years are aimed at ensuring that our punishments have a deterrent effect, and regulatory actions will continue in 2024.

It is understood that Terraform Labs, Binance, and Coinbase are among the recent targets of SEC lawsuits, accusing these platforms of offering unregistered securities. The SEC has also taken enforcement actions against crypto companies like Ripple and Kraken in the past.