Terraform Labs Luna Tokens and Mir Tokens Are Securities, Judge Rules
Terraform Labs violated federal securities laws when it sold the Terra and Luna cryptocurrency to the public, according to a ruling by a U.S. federal judge on Thursday.
Judge Jed Rakoff of the US District Court Southern District of New York ruled that Terraform Labs had failed to register LUNA, MIR – another cryptocurrency within the Terra ecosystem – as securities.
The summary judgment may affect any future litigation regarding Terraform’s securities infringement. Judge Rakoff rejected both parties’ attempts to exclude the testimony of opposing experts who examined the trading activities that led to UST’s debonding in May 2022.
The judge also blocked two other defense witnesses. One would have provided testimony about Terraform’s custodial wallets and the second would have given a jury an overview of Terraform’s cryptoeconomics.
The court’s decision is consistent with regulators’ claims that most cryptocurrencies should be classified as securities and therefore fall within their jurisdiction. However, the court ruling only recognizes that the SEC has the right to oversee two cryptocurrencies: Luna and Mir.
Terraform Labs does not consider tokens to be securities.
We strongly disagree with this decision and do not consider the UST stablecoin as a security. A spokesman for Terraform Labs said in an email that the SEC’s fraud allegations were not supported by any evidence. We will vigorously defend ourselves against these unfounded allegations in court.
Terraform Labs was sued by the SEC earlier this year after filing a series of complaints against other major players in the cryptocurrency space. The SEC filed the lawsuit just months after Terraform Labs unpegged its algorithmic stablecoin UST. This caused the crypto market to go into a standstill.
