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Terraform Labs‘ legal team has strongly disputed the Securities and Exchange Commission’s (SEC) allegations, arguing that token offerings and sales occurred predominantly outside the United States.
In a brief filed Wednesday, Terraform‘s lawyers emphasized that activities related to token sales were conducted “almost entirely outside the United States.” This statement contradicts the SEC’s claim that the firm specifically targeted US investors, which led the agency to demand that Terraform pay $5.3 billion in fines, primarily fines.
Terraform‘s legal representatives also disputed the SEC’s allegations, stating that the agency did not provide any evidence to support its claim that limited activities within the United States directly caused the losses alleged by the SEC. Lawyers emphasized the lack of evidence linking Terraform’s operations in the United States to the significant losses for which the SEC sought compensation.
In February 2023, the SEC charged Terraform and its co-founder Do Kwon in connection with the algorithmic stablecoin Terra USD (UST), which suffered a dramatic crash a year ago. Following a civil fraud trial, a jury ruled last month that both Terraform and Kwon misled investors, holding them liable for civil fraud.
Algorithmic stablecoins like Terra use algorithms and market incentives to maintain a stable price. Terra’s stability was linked to Luna, a governance token used to stabilize prices. UST’s collapse in May 2022 resulted in losses exceeding $50 billion.
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