The U.S. Securities and Exchange Commission has hinted it may be set to appeal a recent ruling against the agency in its case against Ripple Labs and the XRP token. The agency said the Ripple decision was wrong in a filing for a different court case against Terraform Labs and its co-founder Kwon Do-hyeong. The filing was in response to a motion by Terraform lawyers arguing the case against the company should be dismissed based on the Ripple ruling.

See related article: After U.S. court rules Ripple XRP is not a security, industry remains cautious

Fast facts

  • The SEC filed a six-page document on Friday in response to Terraform’s motion for dismissal, stating that: “Respectfully, those portions of [the Ripple ruling] were wrongly decided, and this Court should not follow them.” 
  • “SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review,” the document added in relation to the Ripple ruling.
  • On July 6, U.S. District Court Judge Analisa Torres ruled that Ripple Labs’ programmatic sales of XRP cryptocurrency did not qualify as financial securities, or the offer and sale of investment contracts.
  • The ruling was considered a partial win for Ripple, as the court still ruled that XRP sales to institutional investors constituted the unregistered offer and sale of investment contracts, violating securities law. 
  • However, lawyers for Terraform Labs said the Ripple ruling confirms the “legal insufficiency” of the agency’s argument that Terraform’s stablecoin and other cryptocurrencies were financial securities, according to documents filed July 18 asking the court to dismiss the SEC’s case against Terraform.
  • The SEC charged Singapore-based Terraform and its South Korean founder Kwon in February for a “multi-billion dollar crypto asset securities fraud” involving the Terra stablecoin and Luna cryptocurrency, which both collapsed and erased billions of dollars in value. 
  • South Korean prosecutors issued an arrest warrant for Kwon last September, also on the allegation he offered unregistered investment contract securities via Terra-Luna. He was also charged with other offences, including fraud. His lawyers have rejected the charges.
  • Forkast has requested comment from Terraform Labs.

See related article: How did Do Kwon move US$18 mln in stablecoins to ‘unfreezable’ tokens while in Montenegro jail?