The CEO of Terraform Labs Do kwon appeal was overruled and must comply with the SEC investigation into Mirror Protocol
Tension Between SEC, Terrform Labs
An appeal filed on behalf of Terraform Labs CEO Do Kwon was overruled by a US judge on June 8, ruling that he and his firm must comply with the Securities and Exchange Commission’s (SEC) inquiries into the South Korean company’s Mirror Protocol.
It’s the latest twist in the legal saga between the SEC and Kwon, with the SEC upholding a February judgment that Terraform Labs and Kwon must hand over information relating to the Mirror Protocol and testify before the SEC.
Mirror Protocol is a Terra-based decentralized finance (DeFi) network that allows users to trade synthetic replicas of popular stocks like Tesla and Apple.
Do Kwon Claims
Kwon’s appeal was filed on the grounds that the SEC broke its rules when he was served with a subpoena in October of 2021 at the Messari Mainnet conference.
The Terraform Labs CEO claimed that his company lacked a strong presence in the United States. The appeal also claimed that the subpoena should have been served on Kwon’s legal counsel rather than himself.
Today, the United States Court of Appeals for the Second Circuit upheld February’s ruling.
United States Court of Appeals Upheld Ruling
It said the SEC was justified in subpoenaing Kwon and Terraform Labs based on the company’s “marketing and promotion to U.S. consumers, retention of U.S.-based employees, contracts with U.S.-based entities, and business trips to the U.S., all of which related to the Mirror Protocol and digital assets at issue in the SEC’s investigation.”
Due to a lack of compliance with SEC subpoenas provided online, the court dismissed his contention that it was improper for him to be served papers in person.
The decision was made based on multiple connections in the United States, including a Terraform Labs Director of Special Projects who pushed the company’s digital assets in the country, according to the verdict.
The court concluded that the SEC’s probe was appropriate because of business relationships with US entities to trade assets from the Mirror Protocol, including “a $200,000 transaction with one US-based trading platform.”
During the negotiations, Terraform Labs also “stated that 15% of users of its Mirror Protocol are within the United States.”
