Terraform Labs faces further challenges

10-06-2022 By: Sudeep Saxena
Terraform    Labs

Terraform Labs faces further challenges In a case unconnected

to the Terra collapse, the US government is looking into whether Terraform exploited its Mirror Protocol to market unregistered securities.

The United States Court of Appeals for the Second Circuit denied Terraform Labs CEO Do Kwon's appeal of a Securities and Exchange Commission subpoena on Thursday. In conjunction with its investigation into whether Terra utilized the Mirror Protocol to market unregistered securities, the federal agency was looking for records and witnesses.

The lawsuit was issued on Kwon in September 2021 when he was in New York City for a conference. In an October filing, Kwon asserted that the SEC had broken its own procedures, the Administrative Procedure Act, and other regulations by personally delivering the subpoena. Due to Terraform's lack of interaction with the United States, he later questioned the court's jurisdiction over the matter. In February, the court dismissed such allegations.

The lawsuit was properly served, and the SEC may serve Terraform as a corporate body via Kwon, according to the appeals court. Furthermore, the district court had jurisdiction over Terraform Labs and Kwon, according to the appeals court.

According to the petition issued in October, the SEC began working with Terraform and Kwon in this matter in May 2021. The SEC wrote Kwon, asking for his voluntary help in its inquiry, and Kwon and his legal counsel responded by meeting with SEC attorneys in July. At the time the subpoena was filed, Terraform's lawyers were in active negotiations with the SEC.

Kwon and Terraform have been accused of tax cheating and market abuse in South Korea, in addition to the $40 billion Terra ecosystem's demise. In a May 30 report, a local media source linked Terraform to money laundering. Terraform was also accused of misconduct in a series of tweets a week before.

The SEC is also examining whether Terraform violated investor protection requirements before the Terra collapse, according to sources quoting an anonymous source. Terraform said in a statement to sources that it was not aware of the probe.


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