U.S. Judge Considers Classification of Terraform Labs’ Digital Assets in SEC Lawsuit

U.S. Judge Considers Classification of Terraform Labs’ Digital Assets in SEC Lawsuit

Terraform Labs and its founder, Do Kwon, are seeking the dismissal of a lawsuit filed by the U.S. Securities and Exchange Commission (SEC), which alleges that the digital assets of Terraform Labs, including LUNA and Terra USD, should be classified as securities. The case is currently being deliberated by U.S. District Judge Jed Rakoff in Manhattan.

During the hearing, Judge Rakoff expressed uncertainty about whether Terraform Labs’ offering of the Anchor protocol should be considered a security. The protocol guaranteed returns of up to 20% on TerraUSD deposits. Terraform Labs and Kwon argue that their digital assets do not meet the criteria for securities and contend that the SEC lacks jurisdiction over the industry.

A ruling on the motion to dismiss the case is expected to be delivered by Judge Rakoff on July 14, 2023. Last year, Terra USD experienced a depeg from the U.S., resulting in volatility for the stablecoin. On May 7, a series of events caused its value to plummet almost to zero, leading to a collapse in the value of the LUNA token. Do Kwon is currently facing imprisonment in the U.S. and South Korea, but he is out on bail in Montenegro after receiving approval from the Montenegro Court.