- SEC asks Judge Rakoff to determine if Terraform Labs sold unregistered securities.
- SEC argues that the legal question of securities classification should be decided in court, not by a jury.
- Terraform’s opposition does not address the SEC’s allegations, and the SEC believes the presented facts support their case for a ruling by Judge Rakoff.
In the ongoing legal proceedings between the Securities and Exchange Commission (SEC) and Terraform Labs, the SEC has filed a request for Judge Jed Rakoff to determine if Terraform offered and sold unregistered securities. This article provides a detailed analysis of the case and explores the key legal aspects involved.
The SEC’s Request for Judicial Determination
The SEC has asked Judge Rakoff to prevent a jury from making a decision regarding the alleged securities and instead rule on the legal question of whether Terraform’s offerings constituted unregistered securities. The SEC argues that this matter requires a court determination as it is a legal issue, not a factual one for the jury.
According to the SEC’s filing on December 4, there is no dispute regarding the established facts that demonstrate Terraform’s crypto asset offerings involved an investment of money, a common enterprise, and an expectation of profit derived from the efforts of the defendants. The SEC asserts that the question of whether these offerings qualify as investment contracts is a legal matter to be decided by the court.
Terraform’s Opposition and the SEC’s Response
Terraform, in its opposition filing to the SEC’s motion for summary judgment, did not address the SEC’s allegations of selling and offering unregistered securities in the form of cryptocurrencies. The SEC believes that the “undisputed facts” presented in their previous filings satisfy the legal standard and are sufficient grounds for Judge Rakoff to rule on the case.
The SEC’s Assertion of a “Straightforward” Case
The SEC contends that the case against Terraform Labs is straightforward, suggesting that a summary judgment, which is routinely granted in similar circumstances, should be considered. It is worth noting that a summary judgment was recently granted in the SEC’s case against Ripple, although the outcome was not entirely in favor of the regulatory agency.
In the Ripple case, Judge Analisa Torres ruled that programmatic sales of Ripple’s XRP did not meet the Howey test, but institutional sales were deemed an unregistered securities offering. However, Judge Rakoff, who is also a district judge for the Southern District of New York, did not align with Torres’ ruling when Terraform attempted to use it to dismiss their case. Rakoff emphasized that the Terraform and Ripple cases are separate, citing the evidence provided by the SEC to support their allegations of Terraform misleading investors about the utility of their crypto-assets.
Rakoff further stated that his court rejects the approach adopted by another judge in a similar case, referring to the SEC’s case against Ripple. He highlighted that the Howey test does not differentiate between institutions purchasing crypto-assets directly or through secondary transactions. The crucial factor is whether a reasonable individual would objectively view the defendants’ actions and statements as promising profits based on their efforts, regardless of the purchase method.
Conclusion
The SEC’s request for Judge Rakoff to rule on whether Terraform offered and sold unregistered securities underscores the importance of legal determination in this ongoing case. The outcome will have significant implications for the classification of crypto assets as securities and will shape the regulatory landscape. As the proceedings unfold, the judgment rendered by Judge Rakoff will play a crucial role in defining the legal implications for Terraform and potentially impact the broader crypto industry.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from CryptoNewsBytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.
