The Securities and Exchange Commission (SEC) is seeking Judge Jed Rakoff's decision on whether Terraform Labs and its former CEO, Do Kwon, engaged in the sale of unregistered securities, as reported by Blockworks. The SEC is urging to bypass a jury trial, asserting that the question is legal and should be determined by the court, not a factual inquiry for the jury.
In a filing on December 4, the SEC argued that Terra, in its opposition filing to the SEC's motion for summary judgment, failed to challenge the SEC's claim that it sold and offered unregistered securities in the form of cryptocurrencies. The SEC's legal team believes that the undisputed facts presented in previous filings are sufficient to meet the governing legal standard, allowing Judge Rakoff to make a ruling. The SEC contends that the case is straightforward, warranting a summary judgment, a practice commonly employed in such legal circumstances.
This legal strategy parallels the SEC's approach in the Ripple case, where a summary judgment was granted earlier this summer, although the final decision was not entirely in favor of the regulatory agency. In the Ripple case, Judge Analisa Torres ruled that the programmatic sales of Ripple's XRP did not pass the Howey test, while institutional sales constituted an unregistered securities offering.
Judge Rakoff, who presides over the Terra case and is also a district judge for the Southern District of New York, did not appear to align with Judge Torres's ruling in the Ripple case earlier this summer. When Terraform attempted to leverage the Ripple decision to dismiss its case, Rakoff denied the motion. He emphasized the differences between the Ripple and Terra cases, citing the SEC's allegations that Terraform had the motive to mislead investors about the utility of their crypto-assets. Rakoff's opinion further stated that his court rejects the approach recently adopted by another judge in a similar case, referencing the SEC's case against Ripple. According to Rakoff, the Howey test does not differentiate between institutions that purchase crypto directly or those who acquire assets via secondary transactions.
