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Legal processes in the cryptocurrency market continue to make headlines. Accordingly, a federal judge overseeing the ongoing legal case between the United States Securities and Exchange Commission (SEC) and Terraform Labs signed a protective order keeping court reports confidential prior to the hearing. So, what is expected in the process?
Notable Developments in the Legal Case
In a filing on December 20th at the Southern District of New York U.S. District Court, Judge Jed Rakoff announced that the SEC and Terraform Labs have accepted the terms approved by the court, which require the parties to largely refrain from disclosing reports marked as confidential. All discovery files marked as confidential will also be sealed by the court before the hearing; at this point, the judge expressed that it is unlikely he will approve requests for sealing.
In the decision, it was not specifically stated why Judge Rakoff would seal the filings unless he found good reason. Lawyers representing the SEC and Terraform Labs, as well as its co-founder Do Kwon, accepted the decision taken on December 18th. Kwon is currently detained in Montenegro and is awaiting extradition to either the U.S. or South Korea during this process.
The collapse of Terraform Labs’ stablecoin project TerraUSD (UST), which began to lose value against the U.S. dollar, could have been a significant event that contributed to the downturn of the crypto market in 2022.
SEC and Crypto Companies
In February, the SEC accused Terraform Labs and Kwon of orchestrating a multi-billion dollar securities fraud with cryptocurrency assets and claimed that the parties offered and sold unregistered securities.
The files in the ongoing legal case between the SEC and Terraform could have implications on legal issues affecting many companies in the field. In August, a judge approved an order allowing Terra to summon the dissolved crypto exchange’s bankruptcy case as part of FTX establishments to court. Judge Rakoff also accepted materials submitted confidentially by Jump Crypto Holdings for discovery in the SEC legal case in November.
Many criticize the SEC for its approach to regulating crypto firms in the United States through enforcement. The Commission’s ongoing cases against Binance, Kraken, Ripple, Coinbase, and other crypto companies continue.
