The general counsel for Delphi Lab claimed that the SEC was "more rigorous than normal" in its legal action against Terraform Laboratories and co-founder Do Kwon.
A lawyer claims that the Securities and Exchange Commission's (SEC) action against Terraform Labs and its co-founder Do Kwon might be viewed as a "roadmap" for the SEC's efforts to shut down other stablecoins.
On February 16, Delphi Laboratories' general counsel Gabriel Shapiro told his 33,800 Twitter followers that the SEC's justifications in its lawsuit against Kwon and Terraform were "more comprehensive than normal."
After the SEC's lawsuit filed against Kwon and Terraform on February 16, Shapiro's analysis claims that Kwon and Terraform "orchestrated a multi-billion dollar crypto asset securities scheme involving an algorithmic stablecoin and other crypto asset securities."
According to Shapiro, the lawsuit might act as a "roadmap" for how the regulator might go after further stablecoin issuers in the future. He acknowledged that the SEC had argued TerraClassicUSD (USTC), an algorithmic stablecoin, is a security:
"[The SEC] will allege that integration, promotion, marketing, commercial deals etc building the stablecoin ecosystems are ‘efforts of others’ that are ‘reasonably expected’ and can lead to profits in connection with the stables.”
He noted out the SEC employed the four prongs of the Howey Test to argue that USTC, Terra Luna Classic (LUNC) — renamed from Terra (LUNA) — and Wrapped LUNA (wLUNA) all constituted securities under U.S. securities laws.
The Mirror Protocol, which let users to build what Was dubbed a "mAsset" a cryptocurrency version of an asset that "mirrors" the price behavior of other assets like stocks violated U.S. securities laws.
This securities-based swap allegation by Terraform Labs through the MIR token is a "first" among all the cryptocurrency-related litigation the SEC has brought.
Another "first," according to Shapiro, was the SEC's assertion that wLUNA constituted a "receipt" for a security.
A similar point was made to Ryan Sean Adams' 221,300 Twitter followers on February 16 when he noted that a legal success against Terraform Labs would make it simpler to pursue other stablecoin issuers. Ryan Sean Adams is the host of the cryptocurrency-focused podcast Bankless.
The catastrophic crash of the Terra-linked tokens in May 2022 was partly brought on by USTC losing its peg to the US currency. Due to LUNC's intimate ties to USTC, its price collapsed by almost 100%, sparking a larger decline in the cryptocurrency markets that caused a loss of $40 billion.
Kwon insists he is not "on the run," but South Korean authorities, who issued an arrest order for him, believe he is living in Serbia.
Two South Korean prosecutors traveled to the Balkan state earlier in February in an effort to locate Kwon, but they were unsuccessful.