In a recent court case in Podgorica, Montenegro, Hon Chang-joon, the business partner of cryptocurrency entrepreneur Do Kwon, the creator of the failed Terra (UST) stablecoin, has been taken to court. This development comes after a Manhattan federal judge ruled that regardless of how they are sold, cryptocurrencies are considered securities. This decision allows the Securities and Exchange Commission (SEC) to pursue securities charges against Terraform Labs and its founder Do Kwon.
The ruling by U.S. District Judge Jed Rakoff contradicts a previous ruling from the same district court regarding Ripple, another cryptocurrency. The prior ruling stated that Ripple may not always be categorized as a security, but Judge Rakoff’s opinion does not impact this previous decision.
The judge’s decision is expected to have implications for future appeals and ongoing litigation between the SEC and private sector crypto firms like Ripple. It will set a precedent for how the federal financial regulator handles cases involving fraudulent activities and the unregistered sale of cryptoassets.
Shares of Coinbase, a major crypto exchange, have experienced a 9% decrease in Tuesday morning trading as a result of this ruling.
Kwon and his company Terraform Labs have been accused of defrauding investors through the unregistered sale of multiple cryptoassets, including Luna and the stablecoin TerraUSD. Judge Rakoff emphasized that the court does not differentiate between coins sold directly to institutional investors and those sold through secondary market transactions to retail investors.
The SEC has been actively pursuing legal action against various crypto firms for the alleged unregistered sale of securities, including Coinbase, Gemini, and Genesis. This ruling further strengthens the SEC’s position in these cases.
It is worth noting that CNBC’s Lora Kolodny has contributed to this report.
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