Terraform Labs Loses US Appeal Over SEC Subpoena

The court found that the SEC followed its own rules on serving subpoenas.

Jun 9, 2022 at 3:03 p.m. UTC

Updated Jun 10, 2022 at 2:00 p.m. UTC

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The U.S. Securities and Exchange Commission’s (SEC) serving of Terraform Labs CEO Do Kwon at the Mainnet Conference last year in New York was legitimate, and the company must cooperate with the commission’s investigation, the Court of Appeals for the Second Circuit has ruled.

Kwon and Terraform Labs, the company behind the Terra blockchain, contested the subpoena's validity but lost the case in February and appealed.
On appeal, the court found that the SEC followed its own rules on serving subpoenas, and Terraform Labs’ counsel was not authorized to receive subpoenas.
The court also agreed that Kwon and Terraform Labs had enough ties to the U.S. because the company has employees based in the country and had previously indicated that 15% of users of its Mirror Protocol are located there.
This lawsuit is unrelated to the recent collapse of the Terra ecosystem. Nor is it related to the criminal investigation into Kwon and Terraform Labs by South Korean authorities.

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