• The US Securities and Exchange Commission (SEC) is facing scrutiny for its recent lawsuit against Terraform Labs and its founder, Do Kwon.
• The SEC’s actions are a response to Ripple’s stance that XRP is not a security.
• In contrast, the SEC’s lawsuit against Terraform Labs and Kwon alleges that they conducted a multi-billion dollar crypto asset securities fraud.
Overview of the Situation
The United States Securities and Exchange Commission (SEC) is facing scrutiny for its recent lawsuit against Terraform Labs and its founder, Do Kwon. Court documents suggest that the regulatory body is treating Terra and Kwon with significantly less severity than Ripple, raising questions about the SEC’s inconsistent approach to regulating the cryptocurrency industry.
SEC To Pursue Legal Action
While the SEC seeks to punish only the defendants in the Terra case, it plans to pursue legal action against Ripple and anyone associated with the company, including employees, agents, and lawyers. Ripple has fiercely defended its position that XRP is not a security, and the SEC’s actions are a response to this stance. Ripple recently achieved a minor victory when the SEC admitted that XRP is a software code and not a security. The company argues that it should be held to the same standards as Ethereum, which former SEC chief deemed not to be a security in 2018.
Multi-Billion Dollar Fraud
In contrast, the SEC’s lawsuit against Terraform Labs and Kwon alleges that they conducted a multi-billion dollar crypto asset securities fraud. The complaint asserts that the company sold an „inter-connected suite of crypto asset securities“ through unregistered transactions and misled investors about the stability of Terra’s stablecoin. The SEC’s actions form part of a broader attempt to regulate rapidly growing cryptocurrency industry.
Implications Of This Case
The case has far-reaching implications for future of cryptocurrencies in US – it’s legal test of system “regulation by enforcement” for industry according to Brad Garlinghouse who emphasized this point during WEF 2023 summit speech
As cryptocurrency industry continues developing it’s inevitable regulators will play increasingly significant role shaping it – potential punishments towards companies & individuals could range from fines/warnings all way up jail time depending on severity & circumstances around given case