April 19, 2024
Judge Authorizes Confidentiality in SEC-Terraform Legal Battle
Latest Cryptocurrency News

Judge Approves Protective Order for Confidentiality in SEC vs. Terraform Labs Case

A federal judge in charge of the legal dispute between the United States Securities and Exchange Commission (SEC) and Terraform Labs has authorized a protective order to maintain the confidentiality of certain materials before the trial. Judge Jed Rakoff, in a filing made on December 20 in the U.S. District Court for the Southern District of New York, noted that the SEC and Terraform Labs had reached an agreement on terms approved by the court. These terms require the parties involved to refrain from largely disclosing materials marked as confidential.

All discovery filings marked as confidential will also be sealed by the court before the trial. However, the judge indicated a reluctance to approve future requests for sealing at this stage. The reason behind the confidential filings was not explicitly mentioned in the order, except for Judge Rakoff citing good cause for such a decision. Lawyers representing the SEC, Terraform Labs, and co-founder Do Kwon agreed to this order on December 18. Kwon, meanwhile, is currently held in custody in Montenegro as he awaits extradition to either the U.S. or South Korea.

The collapse of Terraform Labs, particularly concerning its stablecoin TerraUSD (UST) no longer being pegged to the U.S. dollar, was a pivotal event that potentially contributed to the crypto market downturn in 2022. In February, the SEC brought charges against Terraform Labs and Kwon, alleging their involvement in a multi-billion-dollar crypto asset securities fraud. The allegations suggested the parties offered and sold unregistered securities. The filings in the SEC v. Terraform civil case hold significance for legal matters affecting numerous companies within the industry.

In August, a judge authorized a subpoena allowing Terra to reach out to FTX entities as part of the defunct crypto exchange’s bankruptcy case. Additionally, Judge Rakoff accepted confidentially filed materials from Jump Crypto Holdings for the SEC civil case in November.

Criticism has been directed at the SEC for its approach of “regulation by enforcement” concerning crypto firms in the U.S. The commission has ongoing cases against Binance, Kraken, Ripple, Coinbase, and several others.

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