The U.S. SEC seeks summary judgment in its legal battle with Terraform Labs and co-founder Do Kwon, alleging clear violations of securities laws related to Terra’s native cryptocurrency, LUNA, and TerraUSD (UST).
The U.S. Securities and Exchange Commission (SEC) is pushing for a decisive conclusion in its ongoing legal clash with Terraform Labs and Do Kwon. The SEC asserts that the evidence is unequivocal and substantial, pointing to violations of securities laws in the distribution of LUNA, Terra’s native cryptocurrency, and the now-defunct TerraUSD (UST).
According to the SEC’s court filing, Kwon and Terraform Labs engaged in deceptive practices, misrepresenting the security and utility of their protocol and tokens. They falsely claimed partnerships, including one with Chai, a popular Korean online payments platform. Allegedly, they also conducted numerous fictitious transactions to inflate network activity.
Kwon misled investors by making false claims about the stability of UST, which ultimately collapsed. The SEC alleges that secret dealings were behind its temporary recovery. Additionally, the SEC highlights the issuance of LUNA and MIR without proper registration.
Investors were promised shares of transaction fees and LUNA’s value growth as Terra’s adoption increased. This case underscores the legal requirement that investment contracts must depend on another party’s efforts, as defined by the Howey Test.