Home Blockchain Terraform Labs Secures Dentons Representation Despite Objections, U.S. Court Decides

Terraform Labs Secures Dentons Representation Despite Objections, U.S. Court Decides

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Terraform Labs Secures Dentons Representation Despite Objections, U.S. Court Decides

Terraform’s Case Is Tough For Dentons

Not only are Dentons lawyers receiving eye-popping sums for defending Terraform, their work will also be scrutinized in other ongoing lawsuits between crypto companies and regulators.

The SEC alone is currently several other companies for alleged securities frauds, including Ripple, Coinbase, and Binance.

In December, a federal Judge ruled that Terraform Labs and its founder Do Kwon violated U.S. securities laws by failing to register its main businesses—the now-collapsed UST and LUNA (LUNC) cryptocurrencies—as securities offerings.

LUNC is the renamed version of the original LUNA. LUNA V1 played an integral role in pegging Terra’s flagship cryptocurrency, the so-called algorithmic stablecoin UST, to the US dollar.

At the time, many thought UST too clever to fail.

A burn/mint mechanism maintained UST’s $1 value. To create one UST token, you had to burn $1 LUNA, and vice versa.

The mechanism failed in May 2022 when a mass exodus from UST caused LUNA V1 to enter a hyperinflationary spiral.

Two months earlier, the community had passed a proposal that lowered interest rates on UST’s number one use: locking it up in Anchor to generate yield.

With its number one use gone, people began to exit UST en mass, minting trillions of LUNA in the process. During the bank run, LUNA’s token supply went from three quarters of a billion on May 5 to a staggering 7 trillion a week later, where is currently sits.

The ensuing carnage had (and arguably still has) wide repercussions for the entire industry. It set off a recession we’ve only just come out of.

Crypto Winter saw many companies exposed to Terra’s ecosystem filing for bankruptcy, including lenders like Celsius, and Voyage, exchanges like Vauld and FTX, and hedge fund Three Arrows Capital (3AC).

The SEC claims Terraform’s ecosystem wipeout caused $40 billion in damages.

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