Terra lawsuit a ‘roadmap’ to attack other stablecoins: Delphi Labs

Terra lawsuit a ‘roadmap’ to attack other stablecoins: Delphi Labs


The United States Securities and Exchange Commission’s (SEC’s) lawsuit against Terraform Labs and its co-founder Do Kwon could be seen as an SEC “roadmap” to taking down other stablecoins, according to a lawyer.

Gabriel Shapiro, general counsel at investment firm Delphi Labs, explained to his 33,800 Twitter followers on Feb. 16 that the SEC’s arguments in its complaint against Kwon and Terraform were “more thorough than usual.”

Shapiro’s analysis follows the SEC’s Feb. 16 lawsuit against Kwon and Terraform, alleging they “orchestrate[d] a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.”

Shapiro suggested the case could serve as a “roadmap” for how the regulator may sue other stablecoin issuers in the future. He acknowledged the SEC made the case that Terra’s algorithmic stablecoin, TerraClassicUSD (USTC), formerly TerraUSD (UST), constitutes a security:

bybit

“[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 pointed out the SEC applied the four prongs of the Howey test to argue that USTC, Terra Classic (LUNC) — formerly called Terra (LUNA) — and Wrapped LUNA Classic (WLUNC) all constituted securities under U.S. securities laws.

Delphi Labs General Counsel Gabriel Shapiro’s take on the SEC’s lawsuit against Terraform Labs and its CEO Do Kwon. Source: Twitter.

The SEC also argued that Terraform Labs breached U.S. securities laws by launching the Mirror Protocol, which allowed its users to create what Terraform called a “mAsset” — a crypto version of an asset that “mirrors” the price behavior of other assets such as stocks.

The regulator claimed Terraform Labs committed this securities-based swap through the Mirror Protocol (MIR) token — which Shapiro believes to be a “first” in cryptocurrency-related lawsuits filed by the SEC.

Shapiro noted the SEC’s claim that wLUNA constituted a “receipt” for a security was another “first.”

Delphi Labs general counsel Gabriel Shapiro’s analysis on the SEC’s lawsuit filing against Terraform Labs and its CEO Do Kwon. Source: Twitter.

Ryan Sean Adams, the host of the crypto-oriented podcast Bankless, made a similar argument to his 221,300 Twitter followers on Feb. 16, noting that a legal victory against Terraform Labs would make it easier to go after other stablecoin issuers.

The Terra-linked tokens infamously crashed in May 2022, which was partly triggered when USTC lost its peg to the U.S. dollar. As LUNC was closely linked to USTC, its price fell by almost 100% and triggered a wider downturn in the crypto markets, wiping out approximately $40 billion.

Related: Why the SEC wants to ban crypto staking and stablecoins under scrutiny — watch the Market Report live

Kwon maintains that he is not “on the run” and is believed to reside in Serbia, according to South Korean officials who issued a warrant for his arrest.

Earlier in February, two South Korean prosecutors flew to the Balkan state to find Kwon; however, the search attempt was unsuccessful.

Cointelegraph contacted Terraform Labs for comment on the lawsuit but received no response by publication time.





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Pin It on Pinterest

Crypto-Trend
Blockonomics
Crypto-Trend
Terra lawsuit a ‘roadmap’ to attack other stablecoins: Delphi Labs
bybit
Binance
Should Investors Buy Low-Cap Altcoins in Q3 2025? Analysts Weigh In
Pump.fun Token Dips Below ICO Price as Private Sale Whales Offload Over $160M
3 New Cryptos Launched This Week to Keep an Eye On
James Wynn Opens $23M Leveraged Trades on ETH and PEPE via Hyperliquid
Brutal 20% Ethereum price sell-off is not over, but is there a silver lining for ETH?
3 Undervalued Altcoins Analysts Think Are About to Break Out in July
bitcoin
ethereum
tether
binancecoin
solana
ripple
usd-coin
staked-ether
dogecoin
binance-usd
Blockonomics
Bybit
MARA offers up to $1B of note offering to buy Bitcoin
MARA Holdings to raise $850M to buy more Bitcoin and repurchase debt
Online Pastor Indicted for $3.4M Crypto Scam
Teen Has 'Strong Incentives to Flee' After Pleading Guilty to $245M Bitcoin Heist, Gov Says
How to Set Up a Bitcoin Inheritance Plan to Protect Your Crypto
MARA offers up to $1B of note offering to buy Bitcoin
MARA Holdings to raise $850M to buy more Bitcoin and repurchase debt
Online Pastor Indicted for $3.4M Crypto Scam
Teen Has 'Strong Incentives to Flee' After Pleading Guilty to $245M Bitcoin Heist, Gov Says