A US judge has ruled that collapsed crypto company Terraform Labs and its founder Do Kwon offered and sold two digital assets as unregistered securities.
The U.S. Securities and Exchange Commission (SEC) and Terraform Labs both requested summary judgment in an ongoing fraud case.
The SEC alleges the company and Kwon facilitated a multi-billion dollar fraud and violated federal securities laws.
District Judge Jed S. Rakoff with the SEC’s request for summary judgment in terms of the regulator’s allegations that Kwon and Terraform Labs offered and sold the project’s native token, LUNA, and its decentralized finance (DeFi) token Mirror Protocol (MIR) as unregistered securities.
Rakoff, however, sided with Terraform Labs in regard to the SEC’s allegations that the company offered unregistered security-based swaps, tossing that charge.
The judge also denied both sides’ requests for summary judgment on the fraud claims, which will be decided at a jury trial currently scheduled for January 24th.
Kwon was arrested by authorities in Montenegro in late March for using a fake Costa Rican passport, though he argued in court that he obtained the passport through a legitimate agency.
At the time, Montenegro was reportedly considering extraditing Kwon to the US. The country’s justice minister, Andrej Milovic, allegedly preferred sending Kwon to the US rather than South Korea, which also wants to prosecute the Terra founder.
Both countries want him extradited to face fraud charges related to the $40 billion collapse of the Terra ecosystem in May 2022.
After a court in Montenegro approved Kwon’s extradition to both countries, Kwon appealed the ruling. After winning the appeal, the Appeals Court ordered a retrial in the Podgorica Basic Court due to a judge who refused to hear Kwon’s arguments.
