A US Second Circuit court has rejected Terra founder Do Kwon’s plea to ignore the SEC subpoena he was served last year. A process server handed court documents to the founder of the controversial crypto firm Terraform Labs on an escalator at a conference — in a way he deemed unlawful. Kwon sued the SEC, however, the court ruled on Thursday that service as valid. Kwon must now comply with its orders.
The SEC handed Terra’s CEO Do Kwon with a paper subpoena at the 2021 Messari Mainnet conference in New York. Kwon claimed the manner in which it was given violated his due process rights as well as the SEC’s own rules.
In addition to rejecting these claims, the panel snubbed Kwon’s rebuttal that he cannot face legal charges in the US because he is a South Korean citizen residing in Singapore. The court ruled that Terra has US customers, investors, and business operations, granting the SEC sufficient jurisdiction.
Kwon had also blamed the SEC for not obtaining permission from his counsel regarding serving him paperwork. The court rejected that bid.
Kwon’s lawyers had been in contact with the SEC, but the South Korean was not cooperating with the Commission’s orders.
SEC subpoena applied to Terra’s Mirror Protocol
Originally, the SEC sued Kwon and Terraform Labs for its Mirror Protocol which facilitates synthetic assets, so-called mAssets, that “mirror” the price of US equities traded on US stock exchanges.
Months after the SEC’s investigation started, Terra’s flagship ICO, LUNA, and its sister stablecoin, TerraUSD (UST), collapsed. Investors lost tens of billions of dollars in market capitalization across Terra’s ecosystem, making the event crypto’s largest loss to date by dollar figure.
Initially, the SEC’s probe was to determine whether Terra and Kwon had breached federal law by allowing the trading of synthetic US stocks like Amazon, Apple, and Tesla.
The investigation is among the SEC’s efforts to regulate crypto and crack down on crypto scammers.