Terraform Labs have claimed that the SEC had violated rules and served CEO Do Kwon subpoenas improperly. They have asked a New York court for a dismissal.
Cannot Compel Terra And Kwon
Terraform filed a motion against the SEC’s efforts to compel Terraform Labs and Kwon to cooperate with the subpoenas issued by the SEC as part of their investigation of Terra’s Mirror Protocol. The SEC, on its part, had filed its motion after being sued by Kwon and Terraform, who claimed that the SEC had violated its own rules and also the Due Process Clause of the US Constitution when they had served Do Kwon in September.
“TFL is incorporated under the laws of Singapore and maintains corporate offices in Singapore and South Korea. Mr. Kwon is a citizen of South Korea and a resident of Singapore. By statute, the SEC cannot serve administrative subpoenas outside the United States,”
The filing by Kwon’s legal team also stated that the SEC could obtain the relevant information through separate channels such as the International Organization of Securities Commissions’ Enhanced Multilateral Memorandum of Understanding.
Kwon’s attorneys contended that the subpoenas were invalid because the SEC did not get permission from the Commissioners to subpoena Do Kwon. Permission from the Commissioners is necessary when the party being subpoenaed has legal representation.
The SEC’s Response
In its response filed in the same court of New York, the SEC urged the court to ensure that Kwon complied with the subpoenas. The subpoena directed Kwon and Terra to produce specific documents related to the investigation and required Kwon to appear at the SEC’s headquarters to testify in person.
The SEC also denied serving the subpoenas improperly, claiming that it does have the jurisdiction to serve the subpoenas because Kwon was in the United States and served the subpoena in person at Mainnet. It stated in its response that it also had jurisdiction over Terraform Labs because the latter allowed US-Based customers to trade on the platform.
The SEC’s Investigation Of Terra
The SEC started its investigation into Terra Labs just a few months after the launch of the Mirror Protocol. The investigation was started to determine if Terraform Labs violated federal securities laws because it allowed synthetic stocks to be minted and sold on its platform.
The investigation is one of many started by the SEC to unearth any potential scams and regulate the burgeoning crypto industry. The prevailing lack of clarity when it comes to the crypto industry has proven to be a significant hurdle for crypto companies and regulators alike. The SEC has until December 24 to respond to Kwon’s motion of opposition.
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