The Landmark Ruling on Investment Contracts
On December 28, 2023, the Southern District of New York (SDNY) delivered a landmark ruling: $UST, $LUNA, wLUNA, and $MIR — the core tokens of Terraform Labs — were officially deemed investment contracts under the Howey Test. That meant one thing: the court considered them securities.
The ruling validated the SEC’s long-standing argument that Terraform’s token offerings were unregistered securities sales. The decision sent a shockwave through the industry — not just for Terraform, but for every project building on decentralized ecosystems that still rely on expectation-driven value creation.
The SEC’s Case: Promises, Marketing, and Collapse
When the SEC filed its complaint on February 16, 2023, it alleged that Terraform Labs had marketed its tokens in ways that fostered investor expectations of profit based on the team’s work — a direct hit under the Howey framework.
The UST-LUNA crash of 2022, which erased more than $60 billion in market value, became the heart of the SEC’s case. It wasn’t just a technological failure — it was portrayed as a systemic breach of investor trust.
Inside the Courtroom: The Do Kwon Files
As proceedings unfolded, internal messages attributed to Do Kwon surfaced in court filings. One quote became symbolic of the case’s deeper implications:
“I can just create fake transactions that look real.”
The SEC cited these private messages as evidence of intent to manipulate on-chain activity — arguing that such communications reflected the mindset behind public marketing. This single thread of conversation, among others, strengthened the SEC’s fraud and misrepresentation claims, setting the stage for potential criminal liability.
The final verdict for Do Kwon is now expected before the end of 2025 — a moment that will define how accountability is enforced in crypto’s post-2022 era.
The Edward Kim Hearing: Untangling Terra’s Bankruptcy Web
On November 3, 2025, a critical hearing took place involving Edward Kim of Genesis Credit Partners LLC — a name that caused initial confusion with Prof. Dr. Edward Kim, a respected developer within the Terra Classic community. To clarify: this Edward Kim is part of the insolvency process tied to Terraform Labs’ Chapter 11 proceedings — not the L1 Task Force or Terra Classic developer team.
The hearing focused on tracing capital flows, understanding asset recoveries, and determining how Terraform’s remaining resources could be reorganized or redistributed. These proceedings are crucial because they will likely influence how restitution and settlements are structured — and whether some of those recovered assets will eventually reenter the Terra ecosystem or its legacy community in any form.
The Builders Never Stopped — The Rise of Terra Classic
While regulators pursued Terraform, the Terra Classic ($LUNC) community quietly rebuilt what was lost — from the ground up. Since the 2022 crash, $LUNC has transformed into a community-driven, open-governance network. The chain has seen major technical progress:
- •Market Module 2.0 reactivation (enabling on-chain swaps again)
- •IBC reconnection via Orbit Labs
- •Terraport’s new memecoin launchpad, which integrates burn mechanics directly into token creation
- •Over 100 billion $LUNC burned, steadily reducing supply
Despite volatility and external pressure, Terra Classic continues to embody the resilience that the original Terra narrative once promised.
Real Deflation. Real Progress.
Recent on-chain data highlights that organic $LUNC burns are still accelerating. A recent example: a $17,000 transaction triggered the burn of 420 million LUNC — all through legitimate, decentralized activity. No hype. No gimmicks. Just deflation in action.
As Terraport’s new memecoin feature rolls out, billions more LUNC could potentially be burned through transaction-driven mechanisms. The idea: make every meme, swap, and token creation contribute directly to scarcity and sustainability.
Legal Clarity Meets Community Conviction
The contrast couldn’t be sharper: While Terraform Labs faces legal reckoning, the Terra Classic community has taken control of its own destiny. The next few months will determine two things:
- How the Do Kwon verdict reshapes regulatory expectations.
- How the Terra Classic ecosystem leverages innovation — not speculation — to reclaim legitimacy.
This is no longer about revival. It’s about redemption through transparency.
Final Thoughts
The Terraform saga teaches a timeless lesson: Technology alone isn’t enough — trust, accountability, and decentralization are what sustain ecosystems. Terra Classic stands as the community’s counter-narrative to everything that went wrong. It’s the proof that crypto doesn’t die when founders fall — it evolves when believers build.
The Edward Kim hearing and Do Kwon’s verdict may close one chapter, but for $LUNC and $USTC, the real story is just beginning.