Second Circuit Court Order’s Terraform Labs and Do Kwon to Comply With SEC’s Subpoena

The 2nd US Circuit Court of Appeals has upheld a ruling that compels blockchain startup Terraform Labs, and its co-founder Do Kwon into complying with a September 2021 Subpoena served him at a New York Conference. (60).jpg

Against initial perception, the subpoena is unrelated to the collapse of the startups’ tokens, including the UST algorithmic stablecoin and Luna Classic (LUNC) tokens. It is, however, related to one of Kwon’s early projects, the Mirror Protocol, which lets users mint synthetic asset that tracks the price of US Securities like Tesla and Apple stock amongst others.

Do Kwon and his lawyers had argued at the time that the Securities and Exchange Commission (SEC) has no jurisdiction over it. Still, the latest ruling by a US Federal Judge affirmed that the regulator has the authority to serve the subpoena, thus invalidating Terraform Labs’ arguments.

“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.

Part of its basis for declaring that the SEC has the proper jurisdiction is centred on the fact that Kwon’s Mirror protocol which is now unable to function properly with the collapse of UST, is often offered to US investors. The court also highlighted facts in which Terraform Labs paid a US-based exchange platform the sum of $200,000 in order to list the synthetic tokens for trading.

The order to comply with the SEC’s subpoena comes off as one of the many legal woes Do Kwon and his Terraform Labs team are facing at the moment. The collapse of the platform’s associated tokens showed how vulnerable the startup is, and things are not looking better, even though the startup has launched Terra 2.0 after receiving majority backing from the community.

Image source: Shutterstock


Tagged : / / / /

SEC Served Terra’s Do Kwon With Subpoena; Now He’s Suing

Key Takeaways

  • The SEC was rumored to have served a speaker at Messari’s Mainnet conference with a subpoena last month. Now, it’s been confirmed that Terra’s Do Kwon was the recipient.
  • The SEC has primarily taken issue with Terraform Labs’ Mirror Protocol, a DeFi platform for minting synthetic assets on Terra.
  • Kwon and Terraform Labs are now suing the SEC over the subpoenas.

Share this article

Do Kwon is suing the Securities and Exchange Commission over the subpoenas. 

Do Kwon Hits Back at SEC Over Subpoenas

Terraform Labs CEO and founder Do Kwon is suing the Securities and Exchange Commission. 

Court filings show that Kwon and Terraform Labs are fighting back at the U.S. regulator after Kwon was served with two subpoenas last month. The lawsuit challenges two subpoenas that were “improperly issued and served by the SEC and the SEC’s failure to keep confidential an investigation into the “Mirror Protocol.”” 

The lawsuit references an incident at Messari’s Mainnet conference, which took place in New York in September. During the conference, rumors began circulating that the SEC had served a speaker with a subpoena after Indiegogo founder Slava Rubin posted a tweet appearing to confirm that he had witnessed the event. Messari founder Ryan Selkis later posted a similar tweet corroborating the story. 

Though Kwon was rumored to be the recipient, he later denied he’d been approached at the event in an interview with The Defiant

Kwon and Terraform Labs are best known for creating Terra, the stablecoin-focused blockchain powered by the LUNA token. LUNA has a market cap of $17.1 billion, making Terra the eleventh-largest cryptocurrency project. Although stablecoins have been a point of focus for many regulators in recent months, the SEC appears to be more interested in Terraform Labs’ Mirror Protocol, a DeFi project that lets users mint synthetic versions of stocks like Tesla and Apple. As U.S. users can mint Mirror’s synthetics, they could technically be classed as securities, the SEC claims. Terraform Labs has not yet registered any assets with the SEC. 

SIMETRI Research
Sanctor Turbo Demo Day

The lawsuit filed Friday notes that the SEC contacted Kwon over Mirror Protocol back in May 2021, before Kwon was interviewed for five hours the following month. The filings note that the SEC attorneys then advised Terraform Labs that “enforcement action was warranted” on Sep. 15, 2021. Kwon was served with the subpoenas at Mainnet five days later. 

Kwon’s lawsuit contests the SEC’s request for him to provide testimony to U.S. regulators, arguing that he is a resident of South Korea. It also takes issue with the way the subpoenas were served: SEC rules state that investigations should be confidential, but the agency hired a group called the Cavalier Courier & Process Service to serve him the subpoenas at the event. A note in the lawsuit reads: 

“Hiring a “Cavalier” process to approach Mr. Kwon in public, and announce the purpose of his approach, at a summit attended by more than 2,000 people was, at worst, an intentionally brazen display meant to publicly intimidate and embarrass, and at best reckless, creating social media and press speculation about the incident within minutes of the attempted service of process.”

Do Kwon did not immediately respond to Crypto Briefing’s request for comment.

Share this article


Tagged : / / / / /

Uniswap (UNI) price jumps by 15% in DeFi, cryptocurrency market rebound

Uniswap (UNI) was among the best performers among the top cryptocurrency tokens by market capitalization in the previous 24 hours, logging better gains than other top cryptocurrencies, namely Bitcoin (BTC), Ether (ETH) and Binance Coin (BNB).

On Wednesday, the UNI/USD exchange rate jumped 13.26% to hit a seven-day high of $25.68. Traders continued to bid higher on the pair entering Wednesday, pushing its value higher to $26.07 at one point, up more than 15% from the previous session’s open of $22.66.

Market-wide recovery behind UNI gains?

The majority of UNI’s gains in the previous 24 hours seems to have surfaced in the wake of a market-wide recovery.

For instance, the said timeframe witnessed Bitcoin, the benchmark cryptocurrency that enjoys heavy influence on the rest of the crypto tokens, climbed above $47,000 following a 4.85% upside move on Tuesday. Meanwhile, Ethereum saw its native asset, ETH, rallying toward $3,500 in a 4.57% price jump.

Elsewhere in the crypto market, BNB, XRP, Dogecoin (DOGE), Terra (LUNA) and Chainlink’s LINK also rose. In contrast, smart contracts platform Solana’s native asset, SOL, fell 6.47% following a denial-of-service disruption on its network.

At the same time, Cardano (ADA), one of Solana’s top rivals, dropped by more than 1%.

The performance of the top 15 cryptocurrencies in the past 24 hours. Source: TradingView

At first, the gains among the top tokens, including Uniswap, looked to have been helped by capital rotations out of SOL and ADA markets.

In detail, Solana’s market cap surged by more than 400% quarter-to-date following its foray into the booming nonfungible token (NFT) sector, providing traders a decent opportunity to lock interim profits. Additionally, the network outage accelerated the profit-taking scenario.

On the other hand, Cardano attracted speculation because of its Alonzo upgrade, which made it a smart contracts platform for the first time since its launch. In addition, ADA’s 2,500% year-to-date performance gave traders adequate opportunities to “sell the news” and secure gains.

UNI holders are masters of 9.15 million MIR tokens

Uniswap’s superior performance in the previous 24 hours also took cues from speculation that holding UNI could grant them access to airdrop tokens.

In a recent note, Brendan Murray, content marketing manager at Boston-based blockchain analysis firm Flipside Crypto, cited Twitter user Jr3225’s research. The study cited many UNI holders failed to realize that they could claim 9.15 million of the synthetic asset platform Mirror Protocol’s MIR tokens via a December 2020 airdrop.

In comparison, LUNA stakers could claim more free MIR tokens than UNI ones — MIR/USD has surged 200% this year.

Total MIR claimed on the y-axis, airdrop-type on the x-axis. Source: Twitter user Jr3225

The report, published Tuesday, coincided with the UNI price pump.

Uniswap technical outlook 

Uniswap’s latest rally had it test a support confluence made up of falling trendline resistance and the 38.2% Fib line (~$26.093) of a Fibonacci retracement graph (drawn from a $42.89 swing high to $15.70 swing low).

UNI/USD daily price chart. Source: TradingView

Sellers took control near the confluence, prompting UNI/USD to correct by 4.59% to an intraday low of $24.50. Its next support target is — again — a confluence of 23.6% Fib line ($22.12) and the ascending trendline that overall constitutes a rising channel.

Related: Institutional investors dominated the DeFi scene in Q2: Chainalysis report

An interim bullish outlook entails UNI/USD breaking above $26.09 and stepping toward the next Fib levels ($29.30, $32.51, and so on) unless the pair reaches the rising channel’s upper trendline near $42.89.

Meanwhile, a bearish setup could see UNI/USD break below the $22.12 Fib line and the channel support to target $15.70.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.