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

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

Gabriel Shapiro, wide counsel astatine concern steadfast Delphi Labs, explained to his 33,800 Twitter followers connected Feb. 16 that the SEC’s arguments successful its ailment against Kwon and Terraform were “more thorough than usual.”

— _gabrielShapir0 (@lex_node) February 16, 2023

Shapiro’s investigation follows the SEC’s Feb. 16 lawsuit against Kwon and Terraform alleging they “orchestrat[ed] a multi-billion dollar crypto plus securities fraud involving an algorithmic stablecoin and different crypto plus securities.”

Shapiro suggested the lawsuit could service arsenic a “roadmap” for however the regulator whitethorn writer different stablecoin issuers successful the future. He acknowledged the SEC made the lawsuit that Terra’s algorithmic stablecoin, TerraClassicUSD (USTC), constitutes a security:

“[The SEC] volition allege that integration, promotion, marketing, commercialized deals etc gathering the stablecoin ecosystems are ‘efforts of others’ that are ‘reasonably expected’ and tin pb to profits successful transportation with the stables.”

He pointed retired the SEC applied the 4 prongs of the Howey Test to reason that USTC, Terra Luna Classic (LUNC) — renamed from Terra (LUNA) — and Wrapped LUNA (wLUNA) each constituted securities nether U.S. securities laws.

Delphi Labs General Counsel Gabriel Shapiro’s instrumentality connected the SEC’s suit against Terraform Labs and its CEO Do Kwon. Source: Twitter.

The SEC besides argued that Terraform Labs breached U.S. securities laws by launching the Mirror Protocol, which allowed its users to make what Terraform called an “mAsset,” a crypto mentation of an plus that “mirrors” the terms behaviour of different assets specified arsenic stocks.

The regulator claimed Terraform Labs committed this securities-based swap done the MIR token — which Shapiro believes to beryllium a “first” of each the cryptocurrency-related lawsuits filed by the SEC.

Shapiro noted the SEC’s assertion that wLUNA constituted a “receipt” for a information was different “first.”

Delphi Labs General Counsel Gabriel Shapiro’s investigation connected the SEC’s suit filing against Terraform Labs and its CEO Do Kwon. Source: Twitter.

Ryan Sean Adams, the big of the crypto-oriented podcast Bankless, made a akin statement to his 221,300 Twitter followers connected Feb. 16, noting that a ineligible triumph against Terraform Labs would marque it easier to spell aft different stablecoin issuers.

— RYAN SΞAN ADAMS - rsa.eth (@RyanSAdams) February 16, 2023

The Terra-linked tokens infamously crashed successful May, 2022, which was successful portion triggered erstwhile USTC mislaid its peg to the U.S. dollar. As LUNC was intimately linked to USTC, its terms fell by virtually 100% and triggered a wider downturn successful the crypto markets, wiping retired astir $40 cardinal from the crypto markets.

Related: Why the SEC wants to prohibition crypto staking and stablecoins nether scrutiny — Watch The Market Report live

Kwon maintains that helium is not “on the run,” and is believed to beryllium residing successful Serbia according to South Korean officials — who issued a warrant for his arrest.

Earlier successful February, 2 South Korean prosecutors flew to the Balkan authorities to find Kwon, however, the hunt effort was unsuccessful.

Cointelegraph contacted Terraform Labs for remark connected the suit but nary contiguous effect was received.