Judge Jed Rakoff, who is looking into the SEC’s case against the ex-CEO Do Kwon of Terraform Labs, favors the regulatory body. As per the judgment, Kwon and Terraform carried out the sale of uncertified securities pertaining to LUNA and MIR tokens.
The Securities and Exchange Commission pitched forward their assertion that Terraform carried out dealings in unlisted, safety-oriented swaps and hoodwinked the prime investors involved.
According to Rakoff, the SEC has been granted a preliminary judgment on Count IV of the revised complaint, which deals with the defendant’s unlawful sale of LUNA and MIR, as well as their unlisted offerings, in violation of Sections 5(a) and (5c) of the Securities Act.
As Rakoff pointed out, UST, wLUNA, LUNA, and MIR are all investment contracts, which makes them securities. Investment contracts that pass the Howey test are what he calls them.
The trial will now look into the illegal aspects that the SEC has filed against Kwon and Terraform in February 2023.
According to Rakoff, the defendants attempted to make it appear that UST was not a security because customers were aware that its value would remain at $1.00 rather than increasing in value.
However, ever since March 2021, holders of UST have been able to deposit their tokens in the Anchor Protocol, which, as per Kwon, would bring about the greatest stablecoin yield, having a target of 20% set APR.
The SEC has appealed for the judge to provide a judgment linked to the issue of securities to avoid the process of a jury deciding the matter.
The jury selection process will commence on January 24th, and the trial will commence on January 29th.
As per Rakoff, contrary to the claims revolving around the provision and sale of unlisted security-oriented swaps, the illegal claims are a matter to be resolved.
The court, on its part, refused an appeal by the defendants to ignore 2 SEC experts, along with an appeal from the SEC to do away with one expert on the side of the defendants. Rakoff agreed to do away with Raj Unny and Dr. Christine Parlour representing the defense.