In Brief:
- SEC filed subpoenas against Terraform Labs and its CEO, Do Kwon, requiring them to produce certain documents and compelling CEO’s testimony.
- According to the filing, Terraform Labs and Kwon have refused to comply with the orders.
- Terraform responded by saying that the SEC failed to follow its own rules
US SEC has filed against Terraform Labs PTE, Ltd., and its co-founder and CEO, Do Kwon, asking an order directing them to follow the investigative subpoenas for documents and testimony.
The investigation was regarding the Mirror Protocol which was launched by Terraform Labs last year. SEC dubbed Mirror Protocol a place where users create and trade digital assets referred to as mAssets that “mirror” the price stocks and obtain MIR, its “governance tokens.”
The SEC is now investigating if Terraform Labs, Kwon, and others have violated the federal securities laws by not registering the sale of securities, selling security-based-swaps outside of a national security exchange. It is also investigating if the firm is acting as an unregistered broker or dealer, or engaging in securities transactions by an unregistered investment company.
The filing states that the SEC has “reason” to believe that Terraform Labs and Kwon participated in the creation, promotion, and offer to sell “mAssets and MIR tokens” to U.S. investors.
SEC staff had served both Terraform Labs and Kwon with investigative subpoenas requiring the presentation of certain documents and compelling Kwon’s testimony. According to the filing, Terraform Labs and Kwon have refused to present any documents. And Kwon has failed to comply with the testimonial obligations.
The SEC’s application, thus, sought an order from the court directing Terraform Labs and Kwon to comply with the orders and produce documents as required by the subpoenas. They also seek Kwon’s testimony.
The SEC concluded saying it will continue its “fact-finding investigation” and added that to date it has not concluded that any individual or entity has violated the federal securities laws.
TerraForm Labs strikes back
Striking back at the filing by Securities and Exchange Commission, the Singapore-based crypto firm released a statement saying they have filed a case in federal court in New York regarding two investigative subpoenas by the agency.
In its released statement, Terraform replied, “In its press release announcing its filing, the SEC does not address its failure to follow its own rules, and its filings do not deny that it failed to obtain a specific order authorizing service on Do.”
The firm concluded by saying, “Ultimately, the court will decide whether the SEC acted properly. We look forward to presenting our case to the court.”
The SECTerraform has always imposed tough regulatory scrutiny on many crypto firms. In September, SEC had charged two traders for “wash trading” on meme stock options.
