An appeal filed on behalf of Terraform Labs CEO Do Kwon was overruled on June 8 by a U.S. court, stating he and his company are required to comply with investigations by the Securities and Exchange Commission (SEC) into the South Korean-based company’s Mirror Protocol.

It’s the latest development in legal tensions between the SEC and Kwon, affirming a ruling from February that Terraform Labs and Kwon must hand over documents related to the Mirror Protocol and provide testimony to the SEC. 

Mirror Protocol is a decentralized finance (DeFi) platform built on Terra that enables users to exchange synthetic versions of stocks, like Tesla and Apple. 

Kwon’s appeal was filed on the basis that the SEC violated its rules when he was first delivered a subpoena at the Messari Mainnet conference back in October of 2021. 


The Terraform Labs CEO argued that his firm lacked a sufficient presence within U.S. markets. The appeal also argued that the subpoena should’ve been delivered to Kwon’s legal counsel, not him personally.

Today, the United States Court of Appeals for the Second Circuit upheld February’s ruling.  

It said the SEC was justified in subpoenaing Kwon and Terraform Labs based on the company’s “marketing and promotion to U.S. consumers, retention of U.S.-based employees, contracts with U.S.-based entities, and business trips to the U.S., all of which related to the Mirror Protocol and digital assets at issue in the SEC’s investigation.”

The court also dismissed the argument that it was improper for him to be served papers in person due to a lack of compliance with SEC subpoenas delivered electronically.


The determination was based on several contacts within the U.S., including a Director of Special Projects working for Terraform Labs that promoted the company’s digital assets within the country, the ruling read.

The court stated that business arrangements with U.S. companies to trade assets from the Mirror Protocol justified the SEC’s investigation, where “a $200,000 deal with one U.S.-based trading platform” was made. Furthermore, the Terraform Labs “indicated that 15% of users of its Mirror Protocol are within the U.S.” during negotiations.

Terra 2.0

Terraform Labs and Do Kwon have endured a particularly rough year so far.  

Today’s ruling adds pressure to scrutiny following the collapse of TerraUSD (UST) and Terra’s native coin LUNA. The implosion sparked commentary from regulators around the world, which took place as government officials spotlighted stablecoins as potentially unstable and risky assets.

Last month, Terraform Labs cost investors billions as TerraUSD (UST) and LUNA cratered in value. The network’s market capitalization shrank by upwards of 98% within a week, to around $113 million from nearly $30 billion.

Shortly after, the Terra community rebooted the network, removed the stablecoin and relaunched a new LUNA token (rebranding the collapsed token as “Luna Classic”). 

Upon launch, the new token plummeted from $19.54 down to $2.99 today, according to CoinMarketCap.

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