U.S. Second Circuit Orders Do Kwon and Terraform Labs to Heed SEC Subpoena

The U.S. Court of Appeals for the Second Circuit on Thursday rejected Terraform Labs CEO Do Kwon's defense of a Securities and Exchange Commission (SEC) subpoena. The FBI is seeking documents and testimony related to an investigation into whether Terra Corporation used the Mirror agreement to sell unregistered securities.

Kwon received the subpoena for attending a meeting in New York City in September 2021. Kwon claimed in an October filing that the SEC violated its own rules, the Administrative Procedure Act and other statutes by serving the subpoena in person. He also later challenged the court's jurisdiction in the case because of Terraform's lack of ties to the United States. The court dismissed the charges in February.

The appeals court held that the subpoena was correct and that the SEC, through Kwon, could provide Terraform as a corporate entity. Additionally, the appeals court found that the district court did have jurisdiction over Terraform Labs and Kwon.

According to a complaint filed in October, the SEC began interacting with Terraform and Kwon in May 2021. The SEC emailed Kwon asking him to cooperate voluntarily in the investigation, and Kwon and his legal representatives spoke with SEC attorneys in July following a request. At the time of the subpoena, Terraform's attorneys were in active negotiations with the SEC.

In addition to the collapse of the $40 billion Terra ecosystem, Kwon and Terraform face charges of tax evasion and market manipulation in South Korea. Local media linked Terraform to money laundering in a May 30 report. A series of tweets a week ago also brought malfeasance allegations against Terraform.

Here's a deep dive into on-chain data showing that Mirror Protocol, TFL's "decentralized" stock exchange, is really just a farce to enrich the interests of Do Kwon/vc while manipulating governance and messing with retail . Thank you for doing such a poor job of hiding on-chain actions, Do.

— FatMan (@FatManTerra) May 25, 2022

told Bloomberg in a statement that it had no knowledge of the investigation. Whether Terraform has previously violated investor protection regulations. Crashing Terra on Terraform Bloomberg reported on Thursday that the SEC is still investigating, citing an unnamed source.