In the civil case between the United States Securities and Exchange Commission (SEC) and Terraform Labs, a federal judge has approved a protective order to maintain confidentiality of materials prior to trial.
In a filing on December 20 in the U.S. District Court for the Southern District of New York, Judge Jed Rakoff stated that the SEC and Terraform Labs had reached an agreement, approved by the court, which mandates the parties to refrain from largely disclosing materials marked as confidential.
Any discovery filings labeled as confidential will be sealed by the court before the trial. However, the judge indicated it was “unlikely” that requests to seal would be approved at this stage.
The order didn’t explicitly state the reason for the confidential filings, mentioning only Judge Rakoff’s determination of “good cause.” Attorneys representing the SEC, Terraform Labs, and its co-founder Do Kwon reached an agreement on December 18 regarding this order. Kwon is presently detained in Montenegro, awaiting extradition either to the U.S. or South Korea.
The collapse of Terraform Labs, particularly the depegging of its stablecoin TerraUSD (UST) from the U.S. dollar, was a significant event that potentially contributed to the cryptocurrency market downturn in 2022. In February, the SEC accused Terraform Labs and Kwon of allegedly orchestrating a “multi-billion dollar crypto asset securities fraud,” alleging that they offered and sold unregistered securities.
The filings within the SEC v. Terraform civil case could potentially have far-reaching implications for legal matters affecting numerous companies within the industry. In August, a judge authorized a subpoena for FTX entities as part of Terra’s bankruptcy proceedings. Additionally, Judge Rakoff accepted confidential materials from Jump Crypto Holdings submitted during discovery for the SEC civil case in November.
There has been criticism directed at the SEC for employing a “regulation by enforcement” strategy toward crypto firms in the United States. The commission currently has pending cases against major entities such as Binance, Kraken, Ripple, Coinbase, and several others in the cryptocurrency sphere.
