The legal landscape of the cryptocurrency market continues to evolve as the United States Securities and Exchange Commission (SEC) engages in an ongoing lawsuit with Terraform Labs. A federal judge overseeing the case has signed a protective order to keep court filings confidential prior to the trial. The order was agreed upon by both parties, ensuring that discovery documents marked as confidential will be sealed by the court.
Judge Jed Rakoff of the Southern District of New York’s U.S. District Court has stated that unless there is a good reason, the rationale for keeping filings secret was not specified. The decision, which was agreed upon by the SEC and lawyers representing Terraform Labs and its co-founder Do Kwon, comes as Kwon is detained in Montenegro, awaiting possible extradition to the United States or South Korea.
The collapse of Terraform Labs’ stablecoin project TerraUSD (UST), which lost its peg to the U.S. dollar, was a significant event that may have contributed to the downturn of the crypto market in 2022.
In February, the SEC accused Terraform Labs and Kwon of orchestrating a multi-billion dollar securities fraud with unregistered crypto asset securities. The ongoing legal battle between the SEC and Terraform could have implications for legal issues affecting many companies in the sector.
In August, a judge approved an order allowing Terra to subpoena FTX entities as part of a bankruptcy case of a dissolved crypto exchange. Judge Rakoff also accepted confidential materials submitted by Jump Crypto Holdings for discovery in the SEC lawsuit in November.
The SEC has been criticized for its enforcement-first regulatory approach towards crypto firms operating in the United States. The Commission has ongoing cases against major crypto companies including Binance, Kraken, Ripple, Coinbase, and others.