The US Securities and Exchange Commission (SEC) lawsuit against Terraform Labs and its co-founder Do Kwon could be seen as a “road map” for the SEC to take down other stablecoins, according to a lawyer.

Gabriel Shapiro, general counsel at investment firm Delphi Labs, told his 33,800 Twitter followers on February 16 that the SEC’s arguments in its complaint against Kwon and Terraform were “more comprehensive than usual.”

Shapiro’s analysis follows the SEC’s February 16 lawsuit against Kwon and Terraform alleging they “orchestrated[ed] a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.”

Shapiro suggested that the case could serve as a “road map” for how the regulator can sue other stablecoin issuers in the future. He acknowledged that the SEC argued that Terra’s algorithmic stablecoin, TerraClassicUSD (USTC), constitutes a security:

“[The SEC] will allege that the integration, promotion, marketing, trade deals, etc., that build stablecoin ecosystems are ‘efforts of others’ that are ‘reasonably expected’ and can generate profit relative to stablecoins.”

He noted that the SEC applied the four prongs of the Howey Test to argue that USTC, Terra Luna Classic (LUNC)—rebranded from Terra (LUNA)—and Wrapped LUNA (wLUNA) constituted securities under US securities law. .

Delphi Labs General Counsel Gabriel Shapiro’s opinion on the SEC’s lawsuit against Terraform Labs and its CEO, Do Kwon. Fountain: Twitter.

The SEC also argued that Terraform Labs violated US securities laws by launching the Mirror Protocol, which allowed its users to create what Terraform called an “mAsset,” a cryptographic version of an asset that “mirrors” behavior. the prices of other assets, such as stocks. .

The regulator claimed that Terraform Labs compromised this securities-based exchange via the MIR token, which Shapiro believes is the “first” of all cryptocurrency-related lawsuits filed by the SEC.

Shapiro noted that the SEC’s assertion that wLUNA constituted a “receipt” for a security was another “first.”

Delphi Labs General Counsel Gabriel Shapiro’s analysis of the SEC’s filing of the lawsuit against Terraform Labs and its CEO, Do Kwon. Fountain: Twitter.

Ryan Sean Adams, the host of the crypto-oriented Bankless podcast, made a similar argument to his 221,300 Twitter followers on Feb. 16, noting that a legal victory against Terraform Labs would make it easier to go after other stablecoin issuers.

Terra-pegged tokens infamously crashed in May 2022, triggered in part when USTC lost its peg to the US dollar. As LUNC was closely tied to USTC, its price fell by nearly 100% and triggered a broader recession in the crypto markets, wiping approximately $40 billion off the crypto markets.

Related: Why the SEC Wants to Ban Crypto Betting and Stablecoins Under Scrutiny Watch The Market Report live

Kwon maintains that he is not “on the run” and is believed to be residing in Serbia according to South Korean officials, who issued an arrest warrant for him.

In early February, two South Korean prosecutors flew to the Balkan state to find Kwon, however the search attempt was unsuccessful.

Cointelegraph reached out to Terraform Labs for comment on the lawsuit but did not immediately receive a response.

This post Terra Lawsuit Is A ‘Roadmap’ To Attack Other Stablecoins: Delphi Labs

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