Chaos in Crypto: SEC Targets Do Kwon and Terraform Labs

The SEC’s Bold Move

On February 16, the U.S. Securities and Exchange Commission (SEC) dropped a bombshell, accusing Do Kwon and his brainchild, Terraform Labs, of selling what they’ve labeled a “suite of crypto asset securities.” The crypto community is not splitting itself over Kwon’s alleged infractions. Instead, they are more concerned about how the SEC is dragging Terra and Kwon into the courtroom drama. And let’s just say, lawyers have some thoughts—and they’re not holding back.

Lawyers Weigh In

Enter Mike Selig, a Web3 lawyer who took to Twitter to delve into the implications of the SEC’s accusations. According to him, the SEC claims that TerraUSD Classic (USTC)—the algorithmic stablecoin that sent many crypto enthusiasts into a frenzy—is a security because it can be exchanged for another security, Terra (LUNA). Selig’s hot take? “Nearly anything can be a security” under this theory, which may send shivers down the spines of anyone working in crypto.

Complete Discretion

Then there’s Mike Wawszczak, the general counsel for Alliance DAO, who has his eye on SEC Chairperson Gary Gensler. Wawszczak posits that Gensler might be positioning himself for sweeping powers to apply securities laws wherever he pleases. He tweeted about the SEC case, humorously suggesting that the Chairman asked for a $2.2 billion budget for FY 2023—a pretty penny compared to San Francisco’s overall budget of $13 billion. Sounds like we could use a financial planner here, folks!

Banking Comparisons

Not one to miss the fun, Justin Browder from Willkie Farr & Gallagher chuckled at the SEC’s description of USTC. He likened its usage for generating returns to “depositing fiat in a bank.” Browder’s skepticism didn’t stop there—he pondered if there are any non-security currencies that don’t function similarly. In his eyes, the SEC’s current trajectory in regulating crypto is nothing short of “wild.”

Community Reactions

Members of the crypto community have also jumped into the fray. Dylan Daniel chimed in, positing that if everything under the sun gets classified as a security, the SEC may find itself needing to pump up its budget and scale exponentially. As for Gensler? Daniel hopes he’s got a master plan tucked away somewhere. Your guess is as good as mine!

The Broader Picture

The SEC’s attention hasn’t just stopped at Kwon. On February 13, they zeroed in on Paxos, declaring that the Binance USD (BUSD) stablecoin is also a security. Cue widespread bewilderment among crypto enthusiasts, who argued that stablecoin users don’t expect a profitable price hike. It’s a prevailing sentiment: What’s next in the SEC’s quest to regulate and classify every crypto asset they stumble upon?