Terraform Labs' LUNA and MIR Tokens Are Securities, Judge Rules

A federal judge issued summary judgements siding with the SEC's arguments that Terraform had illegally sold unregistered crypto securities.

AccessTimeIconDec 28, 2023 at 11:06 p.m. UTC
Updated Mar 8, 2024 at 7:13 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

A U.S. federal judge ruled on Thursday that Terraform Labs, creator of the ill-fated Terra and Luna cryptocurrencies, violated federal securities laws when it sold its cryptocurrencies to the public.

Judge Jed Rakoff of the U.S. District Court for the Southern District of New York ruled in a summary judgment that Terraform Labs failed to register LUNA and MIR – another cryptocurrency in the Terra ecosystem – as securities.

The summary judgment could shape an eventual trial over Terraform's securities violations. Judge Rakoff denied both parties' efforts to exclude testimony from opposing expert witnesses who have studied the trading activity that led to UST's depegging in May 2022.

But the judge blocked two other defense witnesses, one of whom would have testified on activity in Terraform's custodial wallets, and the other who would have given the jury an overview of Terraform's crypto economy.

The ruling falls in line with the regulators' assertion that most cryptocurrencies ought to be classified as securities and fall under the agency's purview. The court's judgment only recognizes the SEC's right to oversee two cryptocurrencies, Luna and Mir, however.

Terraform Labs believes tokens in consideration are not securities.

"We strongly disagree with the decision and do not believe that the UST stablecoin or the other tokens at issue are securities. Further, the SEC’s fraud claims are not supported by evidence, and we will continue to vigorously defend against those meritless allegations at trial," Terraform Labs' spokesperson told CoinDesk in an email.

The SEC sued Terraform Labs earlier this year, following a rash of similar complaints it filed against several other key players in the cryptocurrency industry. The lawsuit's filing came just months after the notorious depegging of Terraform Labs' algorithmic stablecoin UST, which plunged the crypto industry into a deep winter.

5:14 UTC: Adds comments from Terraform Labs' spokesperson

Edited by Danny Nelson.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Elizabeth Napolitano

Elizabeth Napolitano was a news reporter at CoinDesk.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.