Do Kwon

Do Kwon and Terraform Labs Ordered To Answer SEC Subpoenas Over Unregistered Securities Involving Mirror Protocol


  • The US Second Circuit ruled against Do Kwon’s appeal to render the subpoenas invalid.
  • Kwon argued that the SEC violated the Due Process clause.
  • Kwon’s lawyers also claimed that the agency did not have jurisdiction to launch a probe as Terra is not based in the United States.
  • A three-judge panel found the SEC’s case relevant as Terra has customers in the U.S. and requested compliance with the subpoenas.
  • The SEC launched investigations into Terra’s Mirror Protocol back in 2021 over unregistered securities claims. 

The US Federal Court of Appeal has ordered Do Kwon and Terraform Labs to comply with subpoenas served by the Securities and Exchange Commission over investigations regarding unregistered securities claims.

According to a ruling on Wednesday affirmed by a panel of three judges, the SEC was within its jurisdiction when the agency filed a motion against the Terra founder and his company back in 2021.

Earlier in September 2021, the SEC served Do Kwon at the Messari crypto conference in New York. The agency said the probe was meant to determine if Terra’s Mirror Protocol violated federal securities laws. 

Mirror Protocol is decentralized finance (DeFi) marketplace launched in 2020 where users can mint and trade synthetic assets. These assets mirror the price of stocks, including assets traded on exchanges in the United States.

In response to the SEC, Do Kwon and his lawyers appealed the motion in a New York District Court. Kwon’s appeal claimed that the agency did not adhere to the Due Process Clause enshrined in the U.S. Constitution.

The Terra CEO also argued that the company was based in Singapore and its operations did not fall under the purview of the SEC. 

However, the court said that the SEC was within its jurisdiction since Terra has customers in the US. The initial ruling issued on Thursday, February 17, 2022, requested that both Do Kwon and Terraform Labs comply with the subpoenas. 

The US Second Circuit has now affirmed the ruling and asked both parties to answer the subpoenas served by the SEC. Notably, the investigation is not related to the crumble of Terra’s original tokens – LUNA and UST.

At press time, Terra is not the only crypto company investigated by the SEC. The Gary Gensler-led agency also has cases with Ripple and most recently, Binance’s BNB coin.

Do Kwon Faces Legal Battles At Home And Abroad

The Terra CEO now faces multiple probes from authorities and regulatory agencies both foreign and domestic. Apart from the SEC, South Korean legislators also requested that Do Kwon appear before the Senate and give an account of the events involved in UST and LUNC’s crash (formerly LUNA).