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Terraform Labs’ Operations Adjustments Following SEC Ruling
Terraform Labs (TFL) recently made announcements regarding adjustments to its operations in response to a court ruling concerning the Securities and Exchange Commission’s (SEC) case against the company. The changes are expected to impact its activities in the United States.
Policy Updates and Geoblocking
In preparation for an impending conduct injunction, TFL is set to implement measures that will restrict certain activities for US users. These policy changes are scheduled to take effect in the week of April 28. Despite expressing reluctance, TFL cited “frustration” in having to resort to geoblocking as a necessary adaptation to comply with regulatory requirements.
Although the company emphasized its disapproval of geoblocking on principle, it acknowledged the inevitability of this decision under the circumstances. Notably, some key projects such as Alliance, an open-source Cosmos SDK module, and the Terra blockchain itself will remain unaffected by these adjustments.
Liquidity Management and Withdrawals
One significant repercussion of the injunction involves the withdrawal of liquidity from various positions held on different platforms by TFL. The company plans to initiate the withdrawal of liquidity totaling $23.8 million across Astroport, Ura, and White Whale platforms on April 26. These positions predominantly involve LUNA pairs.
To manage the withdrawn LUNA tokens effectively during the ensuing bankruptcy proceedings, Terraform Labs intends to store them in a multisig account.
SEC’s Legal Actions and Requests
The legal proceedings initiated by the SEC against Terraform Labs earlier this year culminated in a jury finding Terra and its former CEO, Do Kwon, liable for fraud in early April. Subsequently, on April 19, the SEC filed requests for injunctions against the defendants, seeking to impose restrictions on their engagement with crypto asset securities, notably LUNA.
Additionally, the SEC demanded monetary fines and penalties totaling $5.3 billion in response to the alleged misconduct by Terraform Labs and its executives. Despite these legal challenges and financial setbacks, Terraform Labs remains operational and continues to offer select products despite the bankruptcy and the depegging of its stablecoin, TerraUSD, from the US dollar in May 2022.
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