- Terraform Labs and the SEC agreed to keep most case documents confidential, but the exact reasons remain undisclosed.
- The ongoing legal battle between Terraform Labs and the SEC could shape cryptocurrency regulations, with potential consequences for the industry.
Terraform Labs and the United States Securities and Exchange Commission (SEC) have reached an agreement on a protective order in their ongoing civil case. U.S. District Court Judge Jed Rakoff has finalized this order, ushering in a new phase in the legal battle between the regulatory body and the cryptocurrency platform.
What the Protective Order Entails:
This protective order’s main focus is maintaining the privacy of case-related documents. The majority of documents the parties concerned have designated as confidential will not be made public under this decision. Furthermore, the court will seal any discovery files marked as confidential.
- Judge’s discretion:
Judge Rakoff has stated that he is unwilling to grant demands to reveal these private records. Nevertheless, the decision just mentioned “good cause” as the justification, skipping over the details of the confidential status.
- Consent from both parties:
On December 18, the protective order was finally implemented thanks to approval from co-founder Do Kwon and the legal representatives of Terraform Labs and the SEC. It is worth noting that Do Kwon is detained in Montenegro and faces potential extradition to the United States or South Korea.
Terraform Labs and the Cryptocurrency Market:
After its stablecoin, TerraUSD (UST), was unpegged from the US dollar, the collapse of Terraform Labs attracted a lot of attention. Most people in the cryptocurrency community consider this event a turning point, and some even think it was a major factor in the 2022 decline in the market.
In February, the SEC levied charges against Terraform Labs and Do Kwon. They were allegedly involved in a multibillion-dollar crypto asset securities fraud by marketing and selling unregistered securities. These charges have intensified the continuing legal dispute between the SEC and Terraform Labs.
Implications for the Cryptocurrency Sector:
- Legal Precedents:
The ongoing SEC vs. Terraform civil case carries significant implications for the cryptocurrency industry. Notably, a separate court ruling in August permitted Terra to issue subpoenas to FTX entities as part of FTX’s bankruptcy proceedings.
Judge Rakoff received private documents from Jump Crypto Holdings in November for discovery in this case. In this case, the decision will give many businesses in the cryptocurrency field important legal direction.
- Debate Over SEC’s actions:
The SEC’s strategy for policing cryptocurrency companies in the US has drawn a lot of discussion and criticism. Critics have accused the commission of employing a “regulation by enforcement” approach, particularly when dealing with major players in the cryptocurrency market. Notably, the SEC is now pursuing legal action against a number of well-known businesses, including Coinbase, Kraken, Ripple, and Binance.
- Impact on industry:
The collapse of Terraform Labs, especially after the depegging of TerraUSD from the U.S. dollar, was a significant event with potential repercussions. It may have contributed to the crypto market downturn of 2022. With the SEC’s involvement and the legal precedents set by this case, the cryptocurrency industry faces heightened scrutiny and regulatory uncertainty. As the case unfolds, the cryptocurrency industry awaits the outcomes and potential shifts in its regulatory landscape.
