KEY POINTS
- The SEC filed a lawsuit against Terraform Labs in February
- Lawyers representing the SEC and Terraform Labs have agreed to the protective order Monday
- The SEC accused TFL and Kwon of misleading investors about the stability of Terra's stablecoin, UST
A judge overseeing the ongoing case between the U.S. Securities and Exchange Commission and Terraform Labs (TFL) – the blockchain company co-founded and run by the disgraced crypto executive Do Kwon – has approved a protective order that will ensure court filings concerning the lawsuit remain confidential.
In a filing in the U.S. District Court for the Southern District of New York on Wednesday, Judge Jed Rakoff said the SEC and TFL have agreed to the terms approved by the court, requiring both parties to not disclose materials marked as confidential. All discovery filings marked as confidential should also be sealed.
"All Confidential Discovery Material filed with the court, and all portions of pleadings, motions or other papers filed with the court that disclose such confidential discovery material, shall be filed under seal with the clerk of the court and kept under seal until further order of the court. The parties will use their best efforts to minimize such sealing," the court filing read.
"In any event, any party filing a motion or any other papers with the court under seal shall also publicly file a redacted copy of the same, via the Court's Electronic Case Filing system, that redacts only the confidential discovery material itself, and not text that in no material way reveals the confidential discovery material," it added.
Lawyers representing the SEC, Terraform Labs and Kwon have agreed to the protective order on Monday.
In February, the SEC filed a lawsuit against the Singapore-based cryptocurrency company and its co-founder for allegedly orchestrating a multibillion-dollar crypto asset securities fraud that led to billions of dollars in losses.
In the complaint filed at the U.S. District Court for the Southern District of New York, the SEC named Kwon and TFL as defendants. They were accused of fraud, selling unregistered securities and unregistered security-based swaps, among other related claims.
Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.
— U.S. Securities and Exchange Commission (@SECGov) February 16, 2023
"TFL and Kwon also misled investors about one of the most important aspects of Terraform's offering – the stability of UST, the algorithmic 'stablecoin' purportedly pegged to the U.S. dollar," the SEC said in its complaint.
"UST's price falling below its $1.00 'peg' and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing," it added.
