SEC: Judge in Terraform Labs Case Should Decide Over Status of Securities, Not Jury

Table of Contents

• Status of Securities is Not “A Factual Question for the Jury”
• Judge Rakoff Should Be Able to Grant Summary Judgment: SEC

The US Securities and Exchange Commission (SEC) requested the judge overseeing the case against Terraform Labs to rule whether Terraform offered and sold unregistered securities. The SEC argues that a jury should not determine the status of securities. 

Status of Securities is Not “A Factual Question for the Jury”

In its case against Terraform Labs and its former CEO, Do Kwon, the SEC asked that a jury be prevented from deciding the alleged securities.

In a filing to the US District Court for the Southern District of New York, the SEC argued determining whether specific crypto assets are securities is a “legal question to be determined [by] the Court, not a factual question for the jury.” 

The SEC said that sending the question of whether certain crypto in the Terraform case qualified as securities under the Howey Test brought the matter forward for discussion.  

In its filing, the SEC states:

“There is no genuine dispute of material fact that Defendants’ crypto asset offerings involved an investment of money, in a common enterprise, with an expectation of profit to be derived from Defendants’ efforts.” 

The securities agency further claims:

“While the Court may submit questions to the jury to resolve factual disputes as to the underlying elements [...], there are no such disputes here. There are no factual questions concerning how Defendants’ crypto assets were sold, the terms of those offers and sales, or what Defendants said in their marketing materials or promotions surrounding them.” 

The SEC also asserts that Terra failed to raise issue with the SEC’s allegation that it offered and sold crypto as unregistered securities in its opposition motion for summary judgment.

The SEC’s legal team opines the “undisputed facts” they raised in former filings are sufficient to “satisfy the governing legal standard” and are thus a matter for Judge Jed Rakoff to rule on. 

Judge Rakoff Should Be Able to Grant Summary Judgment: SEC

The securities agency continues to argue the matter is “straightforward” and Judge Rakoff could grant a summary judgment, which, according to the SEC, is “routinely” done in “such circumstances.”

In the SEC v Ripple case, a summary judgment was granted by Judge Analisa Torres, but not entirely in favour of the SEC. Judge Torres ruled the programmatic sales of Ripple’s XRP did not qualify as securities under the Howey Test. 

Terraform attempted to have the case against it dismissed, citing Judge Torres’ ruling. Judge Rakoff did, however, not agree with the verdict and said the Ripple and Terraform cases are different. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.