Appeals court rules Do Kwon, Terraform Labs must heed SEC subpoena served in September

Appeals court rules Do Kwon, Terraform Labs must heed SEC subpoena served in September

On Thursday, the United States Court of Appeals (second circuit) rejected Do Kwon’s dispute of a subpoena issued by the Securities and Exchange Commission. In connection with an investigation into whether Terra used Mirror Protocol to unregistered securities, the federal agency sought documents and testimony.

Kwon received the subpoena while attending a conference near New York City in September 2021. Kwon claimed that the SEC had violated its rules and the Administrative Procedure Act by serving the subpoena personally in an October filing. Kwon later disputed the court’s jurisdiction due to Terraform’s inability to contact the United States. These claims were rejected by the court in February.

The appeals court ruled the subpoena had been properly served and that Terraform could be served by the SEC through Kwon as a corporate entity. The appeals court also found that Terraform Labs was under the jurisdiction of the district court.

Similar: Luna Classic pricing error leads the Mirror Protocol exploit

According to the October petition, the SEC initiated contact with Terraform and Kwon regarding this case in May 2021. Kwon was contacted by the SEC to offer his cooperation in its investigation. Kwon and his legal representative spoke with SEC lawyers in July. Terraform’s lawyers were active in negotiations with the SEC when the subpoena came.

Kwon and Terraform were also accused of market manipulation and tax evasion in South Korea after the $40 billion Terra ecosystem collapsed. In a May 30, report, a local media outlet linked Terraform to money laundering. Terraform was also accused of malfeasance in a series of tweets sent a week before.

Let’s take a deeper dive into the chain data to see if Mirror Protocol, TFL’s ‘decentralized stock exchange, is really nothing more than a ruse designed to enrich Do Kwon/VCs and manipulate governance while screwing over retailers. Do, thank you so much for hiding behind-chain moves.
— FatMan (@FatManTerra May 25, 2022

Bloomberg reported Thursday that Terraform was being investigated by the SEC for violating investor protection regulations prior to the Terra collapse. Bloomberg was informed by Terraform that it had not been aware of the investigation.

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