Terraform Labs and its CEO had received subpoenas from the regulator in September 2021, but refused and sued the SEC. Now a court rules in favor of the SEC and orders the company to appear.
A court in the United States has issued an order to Terraform Labs and its CEO, Do Kwon, to comply with subpoenas from the Securities and Exchange Commission (SEC), the country’s main financial regulator.
Court documents revealed that a New York district judge has ordered the leader of the blockchain project, landto attend to the call of the SEC related to the investigation of Mirrora decentralized finance (DeFi) protocol created by Terraform Labs and it runs on top of that blockchain.
The project and its executive director had initially received a subpoena from the agency in September last year. However, in December, terraform filed a motion opposing the SEC’s subpoena efforts. But the dispute appears to be far from over.
The court filing, dated February 17, states that the courtreviewed all submissions from the parties” and ruled in favor of the SEC request, which requires compliance with Terraform Lab with your research citations. The document says:
For the reasons set forth in the conference call record dated February 17, 2022, the SEC’s request is GRANTED, and Terraform and Kwon are hereby ordered to comply with the aforementioned subpoenas.
What is the whole thing about?
The CEO of Terraform Labs He received two subpoenas from the SEC in September 2021, when I was attending the conference of Messari In New York. In response, Kwon filed his own lawsuit against the regulator, claiming that the subpoenas were “incorrectly issued and reported by the SEC“. He also alleged that the agency failed to maintain the confidentiality of its investigation into Mirror.
The main problem for the federal agency is the protocol Mirror. Launched in December 2020, the DeFi platform allows users to mint and trade tokens that reflect the price of the main shares listed on the US stock market. The SEC has been investigating whether terraform has violated federal laws through protocol.
The regulator began to inquire about Mirror in May of last year, a few months after its launch. At that time, SEC attorneys contacted Kwon to inform him of the investigation and asked for his voluntary cooperation. Kwon agreed and hired lawyers in the United States to represent him.
According CoinDeskKwon and terraform they voluntarily cooperated with the SEC for the next four months. At that time, the CEO provided the regulator with details about the creation and structure of the protocol, as well as his personal information about the ownership of the tokens. mAsset or MIR, the token of governance of Mirror. Kwon also submitted documents requested by the regulator.
Shortly after, in September, the SEC said the investigation could only be resolved through an enforcement action; this despite the fact that it had maintained that it had found no conclusive evidence of any violation of the securities law.
This was followed by the aforementioned subpoenas and Kwon’s subsequent lawsuit against the regulator alleging that the agency does not have proper jurisdiction, either over Kwon or over Terraform Labs. It is worth noting that the CEO is not a US citizen and the company is based in Seoul.
US regulators crack down
The SEC investigation into Mirror it is one of many similar investigations that the US regulator is conducting against crypto companies in a bid to detect and curb scams, as well as regulate the growing industry. However, the lack of regulatory clarity continues to be a problem, both for companies, which are seeking to understand the rules and legal boundaries, and for regulators, who have been in a fight to control the sector.
Under the leadership of Gary Gensler, the SEC has been expanding its efforts to regulate the crypto space. But with the sector flourishing apace, the agency has focused its energies on major players. The figures and the rapid growth of terraform Labs they have possibly caught the attention of regulators. According to data from DeFiLlamathe protocol Mirror it currently has about $600 million in total value locked (TVL).
Violation of federal securities law has been a constant theme in the SEC’s investigations and fights against the industry. In this particular case, Mirror offers tokens that reflect the share price of the New York Stock Exchange, an industry classified as securities and regulated by the SEC.
Article by Hannah Estefanía Pérez / DailyBitcoin
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