A federal judge overseeing the civil case between the United States Securities and Exchange Commission and Terraform Labs has signed off on a protective order keeping material confidential ahead of trial.
In a Dec. 20 filing in U.S. District Court for the Southern District of New York, Judge Jed Rakoff said the SEC and Terraform Labs had agreed to terms approved by the court, which require parties to largely not disclose materials marked as confidential. All discovery filings marked as confidential will also be sealed by the court before the trial; at this point, the judge said it was “unlikely” he would approve requests to seal.
The order did not specifically cite the reason for the confidential filings other than Judge Rakoff’s finding “good cause.” Lawyers representing the SEC and Terraform Labs and co-founder Do Kwon agreed to the order on Dec. 18. Kwon is currently in custody in Montenegro while awaiting extradition to the U.S. or South Korea.
The collapse of Terraform Labs amid its stablecoin TerraUSD (UST) depegging from the U.S. dollar was a significant event that may have contributed to the crypto market downturn of 2022. In February, the SEC charged Terraform Labs and Kwon with allegedly “orchestrating a multi-billion dollar crypto asset securities fraud,” claiming the parties offered and sold unregistered securities.
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Filings in the SEC v. Terraform Labs civil case could have implications for legal issues impacting many companies in the space. In August, a judge approved an order allowing Terra to subpoena FTX entities as part of the defunct crypto exchange’s bankruptcy case. Judge Rakoff also accepted materials from Jump Crypto Holdings filed confidentially in discovery for the SEC civil case in November.
Many have criticized the SEC for operating a “regulation by enforcement” approach to crypto firms in the United States. The commission has cases pending against Binance, Kraken, Ripple, Coinbase and others.
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