Terraform Labs Bolsters Tactics to Thwart SEC Lawsuit

Terraform Labs CEO emphasized that the recent bankruptcy filing is critical for pursuing an appeal to the SECโ€™s lawsuit.

Gary Gensler looking into a hole with a Terraform Labs logo in it, in a wierd empty space.
Created by Gabor Kovacs from DailyCoin
  • The Terraform Labs bankruptcy filing was targeted at tackling the ongoing legal battle with the Securities and Exchange Commission.
  • Do Kwon, the SEC, and Terraform Labs are scheduled for trial in the upcoming month.
  • Do Kwon and Terraform Labs face allegations of violating securities laws and orchestrating market manipulation.

The Securities and Exchange Commission (SEC), Do Kwon, and Terraform Labs have been at loggerheads for two years as accountability efforts for the 2022 UST collapse continue to intensify. It seemed as though the debacle would soon come to a close in December 2023 when the commission scored a win in its securities claims against Terra, securing a trial date.

Continuing resistance, Kwon and Terraform Labs have employed various tactics to circumvent the commission and alter their fate, ranging from trial delays to extradition appeals

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In their latest move, the firm filed for Chapter 11 bankruptcy, but there’s more to it than meets the eye.

Terraform Labs Bankruptcy Filing, Defense, or Desperation?ย 

A January 30 court document has revealed that the Terraform Labs bankruptcy filing is part of its ongoing efforts to resolve the SECโ€™s claims against it.

The filing, made on January 21, named Do Kwon as the firm’s majority shareholder and unveiled a 15-person creditor list. The 14-page document also declared up to $500 million in assets, which are reserved to settle the firmโ€™s liabilities in a corresponding amount.

Terraform Labs CEO Chris Armani emphasized that the move is โ€œcriticalโ€ in pursuing an appeal to the SECโ€™s lawsuit to protect against post-trial liquidation. He added that the potential money judgment in the SEC Enforcement Action may be difficult to fulfill, which could jeopardize the firmโ€™s existence.ย 

โ€œWithout the protection of chapter 11, the Debtor would likely have to liquidate after the trial and entry of final judgment, forfeiting its right to an appeal and causing disastrous consequences for the Debtorโ€™s business.โ€

Armani further argued that the SEC lacks jurisdiction over Terraform Labs, asserting that its cryptocurrency tokens โ€œare not securitiesโ€, despite the recent court ruling.

Terraform Labsโ€™ Offerings Not Securities?

While the prolonged debate over the securities status of Terraโ€™s UST was put to rest by Judge Jed Rakoff on December 29, Terraform Labs CEO asserted that the verdict was unacceptable.

The judge had emphasized that โ€œthere is no genuine dispute that UST, LUNA, wLUNA, and MIR are securities because they are investment contractsโ€ and ruled that Terraform Labs, under the governance of Do Kwon, violated the U.S. Securities Act.

Armani contended that the Courtโ€™s summary judgment decision should be reversed, stating that โ€œthe cryptocurrency tokens at issue are not securities under the Acts.โ€

Wednesday, January 31, is set as the first day for the Terraform Labs bankruptcy filing hearing, and the securities fraud claims trial against the SEC is scheduled to begin on March 25, 2024.

On the Flipside

  • Terraform Labs founder Do Kwon is currency incarcerated in Montenegro on document forgery charges.
  • Both Singapore and South Korea seek to hold Do Kwon accountable for the 2022 Terra Collapse.
  • Do Kwon faces up to 40 years behind bars if convicted.

Why This Matters

The tactics by Terraform Labs and Do Kwon showcase their actions to resist ongoing efforts to hold them accountable for the 2022 UST fallout and mitigate potential financial consequences.

Read more on Grayscaleโ€™s shaky market position as ETFs thrive:
Bitcoin ETFs Gather 150K BTC as Grayscaleโ€™s Dominance Wavers

To find out more about the events leading up to the SEC v. Do Kwon trail, read here:
SEC Approves Do Kwon and Terraform Labs Trial Delay Request

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Grace Abidemi

Grace is a crypto reporter for DailyCoin, covering a diverse range of market updates. Grace has minor holdings in Bitcoin & Solana, and moderate holdings in Rune & XRP.

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