Judge rejects motion to dismiss Terraform case, disagrees with Ripple decision
A United States Securities and Exchange Commission lawsuit against Terraform Labs is set to go ahead after a U.S. judge overseeing the case denied the firm’s motion to dismiss on July 31.
In handing down the order, the judge also rejected a decision from another judge who ruled that Ripple did not violate securities laws based on their manner of sale.
The SEC first filed a suit against Terraform Labs and its founder, Do Kwon, on Feb. 16, alleging them of “orchestrating a multi-billion dollar crypto asset securities fraud.”
In April, Terraform Labs’ legal representatives filed a motion for the dismissal of the suit, with supplemental materials for the motion provided in June.
In rejecting the defendants’ motion to dismiss, Judge Jed Rakoff of the Southern District Court of New York found that:
“For purposes of this motion, all well-plead allegations must be taken as true, and all reasonable inferences therefrom must be drawn in the SEC’s favor.”
In its previous dismissal motion, Terraform Labs’ representatives argued that the SEC lacks jurisdiction over both the company and its founder. It also pushed back against the agency’s position that tokens including Mirror Protocol (MIR), Terra Classic (LUNC) and TerraUSD Classic (USTC) are securities.
It also argued that “Congress is not only engaging in robust debate over how crypto should be regulated, it is asking the SEC to wait for Congress to act.”
It went on to cite a procedural issue in the agency’s suit against Coinbase and its newly divulged emails concerning former SEC director William Hinman that figured in the agency’s suit against Ripple Labs.
However, Judge Jed Rakoff of the Southern District Court of New York wrote that “it would ignore reality to place the crypto-currency industry and the American energy and tobacco industries […] on the same plane of importance.”
Newsflash: Ripple Decision Already in (Big) Trouble
SDNY District Judge Jed Rakoff today allowed the SEC to go forward with its case against Terraform Labs and founder Do Kwon. In doing so, Judge Rakoff specifically rejected the distinction made in the Ripple case between public… pic.twitter.com/JZZ8vukfFt
— John Reed Stark (@JohnReedStark) July 31, 2023
The judge devoted several pages to an analysis of the Howey test, which was at the heart of the Hinman discussion. No formal contract is necessary to meet the test, and tokens themselves may be considered tokens in arguments before the court, Rakoff wrote.
Related: SEC appeal could amplify Ripple win, says Ripple Labs legal chief
The court also declined to “draw a distinction between these coins [MIR and LUNA] based on their manner of sale.” Therefore:
“The Court rejects the approach recently adopted by another judge of this District in a similar case, SEC v. Ripple Labs Inc. […] Howey makes no such distinction between [primary and secondary] purchasers.”
That approach — that XRP was a commodity when sold on the secondary market – was a partial win for Ripple. Its rejection here could bode well for the SEC, if other judges follow Rakoff’s example.
Magazine: Terra collapsed because it used hubris for collateral — Knifefight
Vitalik Buterin has opposed the EU’s proposed Chat Control law, warning it undermines digital privacy and creates surveillance backdoors.
Mike Novogratz said “of course” Bitcoin could reach $200,000 if the Federal Reserve adopts a highly dovish stance following a leadership change.
Sir Keir Starmer has said the next election will be an “open fight” between Labour and Reform UK.
The prime minister, speaking at a conference alongside the leaders of Canada, Australia and Iceland, said the UK is “at a crossroads”.
“There’s a battle for the soul of this country, now, as to what sort of country do we want to be?” he said.
“Because that toxic divide, that decline with Reform, it’s built on a sense of grievance.”
It is the first time Sir Keir has explicitly said the next election would be a straight fight between his party and Reform – and comes the day before the Labour conference begins.
Just hours before, after Sky News revealed Nigel Farage is on course to replace him, as a seat-by-seat YouGov poll found an election held tomorrow would result in a hung parliament, with Reform winning 311 seats – just 15 short of the 326 needed to win overall.
Once the Speaker, whose seat is unopposed, and Sinn Fein MPs, who do not sit in parliament, are accounted for, no other party would be able to secure more MPs, so Reform would lead the government.
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YouGov: Farage set to be next PM
Sir Keir said there is a “right-wing proposition” the UK has not had before, as it has been decades of either a Labour or Tory government, “pitched usually pretty much on the centrepiece of politics, the centre ground of politics”.
The PM said Reform and its leader, Mr Farage, provide a “very different proposition” of “patriotic national renewal” under Labour and a “toxic divide”.
He described his Labour government of being “capable of expressing who and what we are as a country accurately and in a way where people feel they’re valued and they belong, and that we can actually move forward together”.
Sir Keir referenced a march down Whitehall two weeks ago, organised by Tommy Robinson, as having “sent shivers through the spines of many communities well away from London”.
Elon Musk appeared via videolink at the rally and said “violence is coming to you”, prompting accusations of inciting violence.
Read more:
Starmer reveals digital ID plan
Davey warns Farage wants to turn Britain into ‘Trump’s America’
The PM said Reform presents a ‘toxic divide
The prime minister said the choice for voters at the next election, set to be in 2029, “is not going to be the traditional Labour versus Conservative”.
“It’s why I’ve said the Conservative Party is dead,” he added.
“Centre-right parties in many European countries have withered on the vine and the same is happening in this country.”
Reacting to Sir Keir’s comments, a Reform UK spokesman said: “For decades, the British people have been betrayed by both Labour and the Conservatives.
“People have voted election after election for lower taxes and controlled immigration, instead, both parties have done the opposite.
“The public are now waking up to the fact Starmer is just continuing the Tory legacy of high taxes and mass immigration.”
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