The United States District Court in New York has ordered Terraform Labs and its CEO Do Kwon to comply with subpoenas issued by the Securities and Exchange Commission (SEC).
The subpoenas were issued in relation to SEC's investigation of a decentralized finance (DeFi) project built on Terra called Mirror Protocol.
According to the court filing, the court reviewed all relevant parties' fillings and held an "oral argument" on February 17, 2022.
"For the reasons stated on the record at the February 17, 2022 conference, the SEC's application is granted, and Terraform and Kwon are hereby ordered to comply with the above-referenced subpoenas," wrote United States District Judge Paul Oetken.
Last October, the SEC served Kwon with the subpoenas at the Messari Mainnet crypto conference in New York. The SEC's focus is on Mirror Protocol, a platform for creating synthetic crypto-versions of popular stocks like Tesla, Microsoft, and Airbnb.
In other words, users can buy and sell synthetic versions of stocks that would typically be sold elsewhere—like Tesla stock on the New York Stock Exchange—at nearly identical prices on a blockchain.
Kwon sues the SEC
Terra's Kwon—who previously denied receiving the subpoenas to the Defiant—then reacted by suing the SEC, claiming the subpoenas were "improperly issued and served."
The lawsuit added that the SEC failed to keep its investigation confidential.
"The subpoenas were served on Mr. Kwon in public. Mr. Kwon was approached by the process server as he exited an escalator at the Mainnet summit while on his way to make a scheduled presentation that was not about the Mirror Protocol," the document also said.
Shortly after Kwon sued the SEC over receiving the subpoena in public, the Terra CEO opined about the crypto regulatory landscape.
Speaking at the Yahoo Finance All Markets Summit in October, Kwon said friction between regulators and the crypto industry often leads to "frameworks that are a little bit more accepting of innovation and change."
He added that the tension between regulators and the DeFi space is a trend occurring around the world, with the United States being no exception.