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SEC Served Terra’s Do Kwon With Subpoena; Now He’s Suing

Court filings confirm that Terraform Labs CEO and founder Do Kwon was served with two subpoenas at Messari’s Mainnet conference last month.

SEC Served Terra’s Do Kwon With Subpoena; Now He’s Suing
Shutterstock cover by Mark Van Scyoc

Key Takeaways

  • The SEC was rumored to have served a speaker at Messari’s Mainnet conference with a subpoena last month. Now, it’s been confirmed that Terra’s Do Kwon was the recipient.
  • The SEC has primarily taken issue with Terraform Labs’ Mirror Protocol, a DeFi platform for minting synthetic assets on Terra.
  • Kwon and Terraform Labs are now suing the SEC over the subpoenas.

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Do Kwon is suing the Securities and Exchange Commission over the subpoenas. 

Do Kwon Hits Back at SEC Over Subpoenas

Terraform Labs CEO and founder Do Kwon is suing the Securities and Exchange Commission. 

Court filings show that Kwon and Terraform Labs are fighting back at the U.S. regulator after Kwon was served with two subpoenas last month. The lawsuit challenges two subpoenas that were “improperly issued and served by the SEC and the SEC’s failure to keep confidential an investigation into the “Mirror Protocol.”” 

The lawsuit references an incident at Messari’s Mainnet conference, which took place in New York in September. During the conference, rumors began circulating that the SEC had served a speaker with a subpoena after Indiegogo founder Slava Rubin posted a tweet appearing to confirm that he had witnessed the event. Messari founder Ryan Selkis later posted a similar tweet corroborating the story. 

Though Kwon was rumored to be the recipient, he later denied he’d been approached at the event in an interview with The Defiant

Kwon and Terraform Labs are best known for creating Terra, the stablecoin-focused blockchain powered by the LUNA token. LUNA has a market cap of $17.1 billion, making Terra the eleventh-largest cryptocurrency project. Although stablecoins have been a point of focus for many regulators in recent months, the SEC appears to be more interested in Terraform Labs’ Mirror Protocol, a DeFi project that lets users mint synthetic versions of stocks like Tesla and Apple. As U.S. users can mint Mirror’s synthetics, they could technically be classed as securities, the SEC claims. Terraform Labs has not yet registered any assets with the SEC. 

The lawsuit filed Friday notes that the SEC contacted Kwon over Mirror Protocol back in May 2021, before Kwon was interviewed for five hours the following month. The filings note that the SEC attorneys then advised Terraform Labs that “enforcement action was warranted” on Sep. 15, 2021. Kwon was served with the subpoenas at Mainnet five days later. 

Kwon’s lawsuit contests the SEC’s request for him to provide testimony to U.S. regulators, arguing that he is a resident of South Korea. It also takes issue with the way the subpoenas were served: SEC rules state that investigations should be confidential, but the agency hired a group called the Cavalier Courier & Process Service to serve him the subpoenas at the event. A note in the lawsuit reads: 

“Hiring a “Cavalier” process to approach Mr. Kwon in public, and announce the purpose of his approach, at a summit attended by more than 2,000 people was, at worst, an intentionally brazen display meant to publicly intimidate and embarrass, and at best reckless, creating social media and press speculation about the incident within minutes of the attempted service of process.”

Do Kwon did not immediately respond to Crypto Briefing’s request for comment.

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