New York federal judge Jed Rakoff denied Terraform Labs’ motion to dismiss allegations by the U.S. Securities and Exchange Commission (SEC) that the stablecoin issuer, along with its founder Do Kwon, defrauded investors and sold digital assets that were unregistered securities. While arriving at this decision, Rakoff disagreed with fellow U.S. district judge Analisa Torres’ ruling that blockchain company Ripple Labs’ native token XRP-USD’s sales on public crypto exchanges were not offers of securities, Bloomberg reported.
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Legal Woes for Crypto Players
The recent Ripple ruling was much applauded by the crypto market and crypto exchange Coinbase Global (NASDAQ:COIN), which is also facing an SEC lawsuit. Following Torres’ ruling, several crypto exchanges, including Coinbase, restarted the trading of XRP-USD on their platforms.
Torres ruled that XRP cryptocurrency is not a security when sold to the general public but is a security in the case of institutional sales. Torres said that Ripple did not violate securities law in selling XRP to retail investors through an exchange intermediary, as purchasers were not aware of whether their funds went to Ripple or a third party.
However, Rakoff contends that there is no difference between public and institutional sales. While Rakoff’s disagreement on the Ripple ruling doesn’t overturn Torres’ ruling, it yet again creates uncertainty with regard to regulations covering the digital assets market.
XRP-USD has been trending lower since this news. Nonetheless, it has rallied about 112% year-to-date.
