SUMMARY Terraform Labs, the entity behind the unsuccessful Terra stablecoin (UST) and LUNA cryptocurrency, has requested a New York judge to allow a jury to determine the regulatory status of the UST and LUNA tokens. The Securities and Exchange Commission (SEC) opposes this, insisting that the judge should decide. The SEC filed a lawsuit against Terraform Labs and its co-founder Do Kwon in February, accusing them of raising billions through the sale of crypto asset securities in unregistered transactions.
In a letter to Judge Jed Rakoff, Terraform Labs’ lawyer, David Kornblau, argued that a jury should assess whether the SEC has sufficiently proven that UST, LUNA, wLUNA, and MIR tokens qualify as securities. This plea comes after the SEC contended that jury decisions on investment contracts are rare. The ongoing legal dispute centers on whether a cryptocurrency, when evaluated using the Howey test, should be classified as a security. If so, registration with the SEC and specific disclosures become mandatory for the issuer.
While Terraform Labs initially sought a summary judgment in its favor, bypassing a full trial, the company now seeks a jury trial if the judge does not grant summary judgment. Terraform Labs cited the precedent of Audet vs. Fraiser, a 2021 case where a jury determined that four cryptoassets were not securities. However, the SEC argues that this was the only instance where a jury was involved in defining an investment contract and asserts that there is no genuine dispute about Terraform Labs selling securities.
Additionally, Do Kwon, co-founder of Terraform Labs, faced legal issues, including arrest in Montenegro in March for using a fake passport. In late November, a local court approved his extradition.
