Delphi Labs’ legal representative stated that the SEC is approaching the lawsuit against Terraform Labs with exceptional care. The SEC could consider its case against Terraform Labs as part of its strategy to target other stablecoins.
On Feb. 16th, the SEC filed a lawsuit against Kwon and Terraform, alleging their involvement in a massive cryptocurrency securities fraud. According to a tweet by Gabriel Shapiro, a lawyer at investment firm Delphi Labs, to his 33,800 Twitter followers.
Additionally, Gabriel Shapiro examined the case and believed it could guide how the SEC may pursue other stablecoin issuers—the SEC argued that Terra’s algorithmic stablecoin, TerraClassicUSD (USTC), is security and classified USTC, LUNC, and WLUNC as securities under U.S. laws using the Howey test.
Gabriel Shapiro considered this a groundbreaking advancement in the SEC’s legal actions concerning cryptocurrencies. Additionally, The SEC claimed that wLUNA constituted the first “receipt” for security. The tokens linked to Terra experienced a well-known crash in May 2022, mainly caused by USTC’s failure to maintain its peg to the U.S. dollar.
Terra Linked Token Crash and Kwon’s Whereabouts
The value of LUNC dropped by almost 100% due to its close association with USTC. It also resulted in a more extensive drop in the cryptocurrency markets that wiped out around $40 billion. South Korean officials who issued an arrest warrant for Kwon report that he denies being on the run.
He also said that he resides in Serbia. In February, two South Korean prosecutors traveled to the Balkan state to search for him, but they were unsuccessful.
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