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Do Kwon and Terraform Labs to Comply With the SEC Investigation After Losing Appeal Case

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A recent court decision granted a motion from the Securities and Exchange Commission (SEC) to order Terraform Labs and its co-founder Do Kwon to comply with the agency’s subpoenas.

Court decisions in favor of the SEC

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The United States Court of Appeals for the Second Circuit held decree on Wednesday (June 8, 2022). The SEC is investigating whether Do Kwon and Terraform Labs, collectively referred to as the appellants, violated securities laws with Mirror Protocol, a DeFi project built on the Terra blockchain.

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The Mirror protocol allows users to buy popular stocks like Tesla or Microsoft on the blockchain. At the end of May, the project suffered an exploit that resulted in hackers stealing $2 million before the developers could fix the problem.

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Back in September 2021, Do Kwon was served subpoenas by the US securities regulator while he was attending a conference in New York. However, the petitioners defied the SEC, claiming that the agency violated its rules of practice and argued that the district court did not have 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 the SEC’s Mirror Protocol investigation subpoenas.


The applicants later appealed against the court’s decision, but lost their appeal case. An extract from the judgment says:

“We have considered all the remaining arguments of the appellants and have come to the conclusion that they are groundless. For the above reasons, we conclude that the district court has properly granted the SEC’s motion for an order requiring the enforcement of subpoenas, and we CONFIRM the district court’s order.”

Terra employee allegedly stole 80 bitcoins

While the SEC’s subpoenas are not related to Terra’s collapse, Terraform Labs (TFL)’s problems continue to escalate as South Korean authorities launch new investigations into the company. This time, one of the TFL executives is being investigated for allegedly stealing the company’s bitcoin assets.

According to Yonhap News Agency, a Terraform Labs employee is under investigation for stealing 80 BTC ($2.4 million at current price). However, it remains unknown if the embezzlement is related to co-founder Do Kwon or other TFL employees.

This happened a few days after all TFL employees came under investigation by the South Korean authorities. It was previously reported that co-founder Do Kwon is set to appear before the country’s parliament.

After the collapse of Terra, Do Koun and Shin faced numerous lawsuits from affected investors who lost millions of dollars. As previously reported Crypto Potato after Terra Saga, criminal and civil lawsuits were brought against Do Kwon by investors, as well as a forfeiture order against Kwon’s assets.

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