A recent court ruling has granted an application by the Securities and Exchange Commission (SEC) to order Terraform Labs and its co-founder Do Kwon to comply with the agency’s investigative subpoenas.
Court Rules in Favor of the SEC
The United State Court of Appeals for the Second Circuit made the ruling on Wednesday (June 8, 2022). The SEC is investigating whether Do Kwon and Terraform Labs, collectively called appellants, violated securities laws with Mirror Protocol, a DeFi project built on the Terra blockchain.
Mirror Protocol allows users to purchase popular stocks like Tesla or Microsoft on the blockchain. Late in May, the project suffered an exploit that led to hackers stealing $2 million before developers were able to fix the problem.
Back in September 2021, the American securities regulator served subpoenas to Do Kwon while he was attending a conference in New York City. However, the appellants challenged the SEC stating that the agency violated its rules of practice and argued that the district court lacked jurisdiction over Do Kwon and TFL.
Meanwhile, the latest court ruling comes shortly after a U.S. District Court in February 2022 ordered Do Kwon and Terraform Labs (TFL) to cooperate with SEC’s investigative subpoenas into Mirror Protocol.
The appellants later challenged the court’s decision but lost the appeal case. An excerpt from the court order said:
“We have considered all of Appellants’ remaining arguments and conclude they are without merit. For the foregoing reasons, we conclude that the district court properly granted the SEC’s application for an order requiring compliance with the investigative subpoenas and we AFFIRM the order of the district court.”
Terra Employee Allegedly Stole 80 Bitcoin
While the SEC investigation subpoenas are not related to the Terra collapse, Terraform Labs’ (TFL) troubles continue to deepen as South Korean authorities conduct more investigations into the company. This time around, the probe is on one of TFL’s executives for allegedly embezzling the company’s bitcoin holdings.
According to Yonhap News Agency, an employee of Terraform Labs is being investigated for stealing 80 BTC ($2.4 million at the current price). However, it remains unknown if the embezzlement is linked to co-founder Do Kwon or other TFL employees.
The development comes days after all TFL employees came under investigation from South Korean authorities. There were earlier reports that co-founder Do Kwon was going to appear before the country’s Parliament.
Since Terra’s collapse, Do Kown, and Shin have faced multiple lawsuits from aggrieved investors who lost millions of dollars. As previously reported by CryptoPotato following the Terra Saga, investors slammed Do Kwon with criminal and civil lawsuits and also sought an order to confiscate Kwon’s assets.