Terraform Labs Reaches Settlement With the SEC – Hope for $USTC, $LUNA, $LUNC?

Singapore-based startup Terraform Labs, best known for its Terra blockchain protocol, reached a tentative settlement with the US Securities and Exchange Commission (SEC) on May 29. The news drove prices of Terra ecosystem tokens up despite lingering legal uncertainty.

Let's dive into the Terraform Labs vs SEC case details and its impact on the ecosystem's token performance.

Unpacking the Terraform Labs vs SEC CaseIn April, a Manhattan jury found Terraform Labs and its co-founder Do Kwon liable for fraud. The SEC accused the company of misleading investors about the stability of its algorithmic stablecoin, Terra Classic USD ($USTC).

In May 2022, Terra's entire ecosystem crashed, losing billions of investor dollars. The SEC argued Terraform Labs falsely implied that the $USTC's algorithm allowed it to naturally heal' in the event of a de-peg.

Adding to their fabricated proclamations, Terraform Labs and Do Kwon alleged that $USTC is used in a popular Korean payment platform, Chai.

Despite these accusations, Terraform Labs disagrees with the court findings and objects to the SEC's authority to undertake such a case.

Terraform Labs Statement on Verdict in SEC Proceedings:

We are very disappointed with the verdict, which we do not believe is supported by the evidence. We continue to maintain that the SEC does not have the legal authority to bring this case at all, and we are carefully...

- Terra Powered by LUNA (@terra_money) April 5, 2024

In response, the SEC Enforcement Division's director, Gurbon Grewal, argued the verdict should warn other crypto companies about the repercussions of false claims.

Additionally, Do Kwon faces ongoing criminal charges related to Terra's ecosystem collapse in South Korea and the US. Trying to flee to Dubai in March 2023, Do Kwon was caught and is now awaiting extradition proceedings in Montenegro.

Terra Reaches an Agreement With the SEC

Terra ecosystem tokens, $USTC, Terra Classic ($LUNC), and Terra ($LUNA), had a rough time following the court's verdict. Luckily for investors, Terraform Labs and Do Kwon reached a tentative settlement with the SEC on May 29.

$LUNA price dropped 32% on April 5, immediately after the court announced the verdict

Initially, the regulator asked defendants to relinquish $5.3B in ill-gotten gains' in addition to a $420M fine for the company and a $100M fine for Kwon imposed by the SEC.

The settlement's details are unknown; the parties must submit the final terms for court approval by June 12. The defendants likely reduced the financial penalty through negotiations.

Terra's Resurrection? $USTC, $LUNC, $LUNA Up

Despite the agreement's ambiguity, its positive (albeit tentative) impact on $USTC, $LUNA, and $LUNC is already evident.

$LUNA surged 32% (from $0.59 to $0.78) on May 30 but has since fallen to $0.65. $LUNA's return to its all-time high of $10.72 hinges entirely on a court ruling in Terraform Labs' favor.

Similarly, $USTC has been showing signs of recovery compared to 2023. The token's price grew by 51% year-to-date but remains 97% below its initial listing price.

$LUNCfell from $82.55 on May 4, 2022, to $0.0001147 on May 14. While $LUNC is nowhere near its prior highs, it grew by 8.36% last monthand 2.10% this week.

The SEC settlement sparked interest in Terra ecosystem tokens but isn't the only reason for the positive trend. On June 2, the Terra Luna Classic community unanimously passed a software upgrade proposal that could strengthen the positive sentiment.

$LUNC's 200-day moving averages indicate an upward trend, and 81% of Binance's community is bullish on the token. However, $LUNC will unlikely reach $1 in the following decade.

$LUNA's 50-day and 200-day moving averages are also bullish, yet the community is divided: 50% of Binance's users are hopeful about the token's future, 37,5% are bearish, and 12.5% are neutral.

On the other hand, $USTC's 200-day moving averages show a downward trend. Although the community is mostly bullish, the long-term picture is grim.

Final Thoughts

Terraform Labs' recent settlement with the SEC offers a glimmer of hope for its ecosystem tokens. Following the news, all three tokens saw substantial price increases, but only time will tell if they will ever reach their prior prime.

Terra's case is a case in point for the importance of doing your own diligence and diversifying your portfolio. The crypto market is volatile, so don't invest more than you're prepared to lose.

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