Terraform Labs and its CEO, Do Kwon, must respond to the SEC’s subpoenas linked to the Mirror Protocol, according to a decision issued by the US Second Circuit Court of Appeal on Wednesday.
The Securities and Exchange Commission is investigating whether Terraform and Kwon were selling unregistered securities using the Mirror Protocol, which allows users to trade with crypto tokens that mimic large shares such as Apple and Amazon.
During Messari’s crypto conference, in Mainnet, New York in September 2021, the administrator handed over the papers to Kwon. Kwon and Terraform filed an appeal, claiming that the SEC had violated its rules by working for Kwon personally, and that the court had no jurisdiction because Terraform was not in the United States.
Because Terraform’s attorney was not authorized to obtain documents, Kwon had to be handed over to the SEC in person.
It said Terraform Labs and Kwon marketed tokens to US-based users and investors, that they hired US employees, and that they had trade agreements with US-based businesses (which included $ 200,000 transactions and unnamed transactions). According to the petition, one company claimed that 15% of Mirror Protocol users settled in the United States while interviewing them. Contradictory arguments were dismissed by the court.
The event has nothing to do with the tragic collapse of the Terra blockchain last month, when its native token, Luna, faced death as its supply grew exponentially. This was due to its relationship with stablecoin TerraUSD (UST), which saw its value decline after losing its connection to the US dollar. Market capitalization for both projects dropped by about $ 40 billion.
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