• The ruling is unrelated to the collapse of TerraUSD
  • Do Kwon, who now lives in Singapore, had argued the SEC has no jurisdiction over him

Do Kwon, the infamous founder and CEO of Terraform Labs, is now fighting legal fires on multiple fronts. 

The company and its founder may have legal liability in the wake of the failure of stablecoin TerraUSD (UST) last month. A US federal judge has ordered Kwon to comply with an earlier SEC subpoena that he sought to avoid.

The SEC began investigating a Terraform Labs project, Mirror Protocol, last year and served Kwon a subpoena at a New York conference on Sept. 20, 2021, court filings show.

Mirror, a decentralized finance (DeFi) protocol on the Terra blockchain, enabled users to mint synthetic assets that mirror the price of securities such as TSLA and GOOGL, using UST as collateral. Since the UST depeg, the project has been in disarray, unable to operate as designed, absent a functioning stablecoin. Mirror’s governance has also been unable to reach a quorum on proposals, and its developers remain quiet.

Kwon initially denied he had been served at all, but when the truth came out, he took the bold step of suing the SEC — his attorneys argued the service was improper.

A district court concluded the SEC complied with its rules, and that the agency has sufficient jurisdiction. The 2nd US Circuit Court of Appeals upheld that ruling on Wednesday, rejecting Terraform Labs (TFL) and Kwon’s appeal.

Kwon’s legal counsel told the court that Kwon had never authorized said counsel to receive subpoenas, rendering the agency’s argument moot.

“Appellants’ reading of the Rules is contrary to the text and would produce absurd results by allowing a party to insist on service through counsel, but allow the party to block said service by not authorizing their counsel to receive any filings,” the appeals court wrote in its decision.

The district court also concluded it had personal jurisdiction over TFL and Kwon, citing seven criteria linking their actions to the US. Notably, the court ruled TFL promoted the protocol’s tokens to US-based consumers and investors, retained US employees and even paid an unnamed exchange $200,000 to list the tokens for trading.

“Appellants’ arguments to the contrary are unpersuasive,” the court wrote.

The ruling specifically does not address whether Terra’s digital assets are securities under US law.

Mirror Protocol has yet to announce whether it will relaunch on the new incarnation of the Terra mainnet, which went live on May 27, 2022, following a community vote.

Mirror’s token MIR is down over 98% from an all-time high in May 2021, trading at $0.24 as of 12:15 pm ET, according to CoinGecko.

TFL representatives did not immediately return a request for comment.


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  • Macauley was an editor and content creator in the professional chess world for 14 years, prior to joining Blockworks. At Bucerius Law School (Master in Law and Business, 2020) he researched stablecoins, decentralized finance and central bank digital currencies. He also holds an MA in Film Studies; film credits include Associate Producer of the 2016 Netflix feature documentary, "Magnus" about World Chess Champion Magnus Carlsen. He is based in Germany. Contact Macauley via email at [email protected] or on Twitter @yeluacaM