In a recent development, the Southern District of New York’s Judge Jed Rakoff has delivered a summary judgment, suggesting that four crypto tokens sold by Terraform Labs, co-founded by Do Kwon, are unregistered securities. These tokens include TerraUSD (UST), LUNA, wLUNA, and Mirror Protocol (MIR).
Understanding the Ruling
The judge clarified that even though UST was designed to maintain a $1 peg and not yield returns for its holders, it still qualifies as a security when paired with Anchor Protocol. This system offered nearly 20% returns to UST holders who staked their tokens. As of May 2022, 14 billion out of the 18.5 billion UST tokens in circulation were staked in Anchor.
However, Judge Rakoff did rule in the defendants’ favor on one count. He found that Terra’s Mirror Protocol “mAssets,” which mirror real-world assets like stocks for trading, did not qualify as security-based swaps, dismissing two charges.
Chai Payments App: A Case of Misrepresentation?
Interestingly, the judge also discussed evidence presented by the SEC, suggesting that the Chai payments app, frequently touted by Kwon as a practical application of the Terra blockchain, never actually operated on the Terra blockchain. Instead, transactions were supposedly settled using conventional methods and then ‘mirrored’ on the Terra blockchain by a server under Kwon’s control.
Supporting evidence includes an email from a Chai employee dating back to May 2020, stating that Chai would “process transaction[s] outside [the] blockchain” and then “write a record on the Terra blockchain in parallel.”
Whistleblower Revelations
Adding to the intrigue, a whistleblower from Chai, who also served as the Chief Product Officer, has made claims that there was no crypto activity within Chai. The whistleblower alleges that upon confronting Kwon about the true nature of Chai in September 2021, Kwon did not deny the allegations but expressed indifference about Chai.
Despite the compelling evidence, Judge Rakoff noted that “genuine disputes of material fact linger that preclude summary judgment for any party on the fraud claims.” This uncertainty stems from the fact that much of the SEC’s evidence is whistleblower testimony, which jurors may find less credible.
As the Chai payments app and Terra ecosystem continue to face scrutiny, it’s crucial for investors and enthusiasts to stay informed. Platforms like cryptoview.io provide a comprehensive view of the crypto landscape, enabling users to track trends, charts, and news.
Stay updated with cryptoview.ioNote: This article does not constitute financial advice. Always do your own research before investing in cryptocurrencies.
