Terraform Labs, the Singapore-based crypto firm behind the Terra stablecoin and the Terra blockchain network, is now the subject of a subpoena enforcement action filed by the U.S. Securities and Exchange Commission.
According to a litigation filing released by the Commission, the action is made in lieu of a response by Terraform Labs on compliance directives from the regulator with regards to investigative subpoenas for documents and testimony.
The filing made by the Commission to the U.S. District Court for the Southern District of New York claimed that it has active investigations into the firm’s potential violations of securities laws, whose scope extends to an allegation on Terraform Labs operating as an unregistered broker or dealer, as well as the sale of securities outside of a duly recognized national security exchange.
Further, the filing states that the ongoing investigations reveal how the SEC has “reason to believe” that Terraform Labs and Do Kwon, its CEO, are directly involved in the “creation, promotion, and offer[ing] to sell mAssets and MIR tokens to U.S. investors.”
“[…] despite numerous attempts to negotiate with counsel, Terraform Labs and Kwon have refused to produce any documents and Kwon has failed to comply with the testimonial obligations.” the Commission claims.
Beforehand, Do Kwon has filed a complaint against the SEC in which his defense detailed how the executive was improperly served at the Messari Mainnet Conference held in September.
“The subpoenas were served on Mr. Kwon in public: Mr. Kwon was approached by the process server as he exited an escalator at the Mainnet summit while on his way to make a scheduled presentation that was not about the Mirror Protocol. The SEC’s conduct here violated its rules requiring it to keep formal orders of investigation confidential.” the complaint stated.
Notably, Mirror Protocol is just one of over 60 decentralized applications building on the Terra blockchain, a unique project in the crypto space that features a multiplicity of algorithmic stablecoins, instead of just one issued stablecoin. The allegations from the SEC stem from the fact that Mirror Protocol was designed to create fungible assets in the form of “synthetics” which track the price of real-world assets such as stocks and securities.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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