SEC wants to leverage partial Terraform court victory in cases against Coinbase, Binance

The Securities and Exchange Commission wants to leverage a partial win in its ongoing court against Terraform Labs in its separate cases against the two largest crypto exchanges, Binance and Coinbase. 

In a Thursday filing involving its case brought against Coinbase, the agency submitted the Terraform Labs court ruling from the Southern District of New York that granted a summary judgment on the claim that UST, LUNA, wLUNA and MIR tokens are securities. 

"In so doing, the Terraform court resolved in the SEC's favor issues relevant to the consideration of Defendants' motion in this case," the SEC wrote, referring Coinbase's earlier motion for a judgment in its favor. 

The filing is aimed to further support the SEC's earlier opposition to a Coinbase motion.

"Each crypto asset issuer invited investors – including purchasers on Coinbase’s platform – reasonably to expect the value of their investment to increase based on the issuer’s broadly-disseminated plan to develop and maintain the asset’s value (including through a secondary market for resale)," an SEC attorney wrote in October.

UST, LUNA, wLUNA and MIR tokens are not mentioned in the SEC complaint against Coinbase, which points at a different set of tokens it insists should be deemed unregistered securities, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH and NEXO.

Binance case

In a parallel lawsuit against Binance, the SEC is also looking to use the Terraform Labs judgment to support its case. In a separate filing on Wednesday, the agency asked a D.C. court to take the Terraform ruling into account while considering Binance's motions to dismiss the case

"The court’s analysis of the Terraform defendants' so-called 'stablecoin' UST is particularly relevant to this Court's consideration of Defendants' arguments concerning Binance's so-called 'stablecoin' BUSD, and Defendants' stalking-as-a service, BNB Vault, and Simple Earn programs," the Wednesday filing reads.

Terraform Labs previously used arguments similar to those Binance is using now, the SEC said, trying to "artificially separate" selling its tokens from "developing and promoting" the Anchor protocol, where the tokens could be staked to generate profit. The situation is similar to that of Binance offering BUSD, together with staking-as-a-service, BNB Vault, and Simple Earn program, the SEC said. 

That "provides further grounds for this Court to deny Defendants' motions to dismiss," the agency wrote. 

In November, Binance and its former CEO Chanpeng Zhao agreed to settle criminal charges with the Department of Justice and plead guilty to violating the Bank Secrecy Act, knowingly failing to register as a money transmitting business, and facilitating sanctions evasion. The company agreed to pay an unprecedented $4.3 billion penalty and appoint a new CEO and an external monitor. 

The SEC's lawsuit against Binance for allegedly operating an unregistered securities exchange is still ongoing. The agency sued the largest exchange in June, alleging that Binance and affiliated companies repeatedly lied to customers and misdirected funds to a separate investment fund owned by Zhao. Over the past seven months, Binance filed multiple motions to dismiss the case.

The SEC declined to comment on the filings. Coinbase and Binance did not immediately reply to requests for comment.