SEC Takes Enforcement Actions Against Terraform Labs and Its CEO

The US Securities and Exchange Commission (SEC) has charged Terraform Labs PTE, Ltd. (Terraform Labs), and its co-founder and CEO, Do Kwon, seeking an order directing them to comply with investigative subpoenas for documents and testimony.

According to the financial watchdog, Terraform Labs launched the Mirror Protocol in 2020, through which users may create and trade digital assets referred to as mAssets that "mirror" the price of U.S. securities, and obtain Mirror's "governance tokens" referred to as MIR tokens.

Whereas, based on the ongoing investigation, the SEC has reason to believe that Terraform Labs and Kwon participated in the creation, promotion, and offer to sell mAssets and MIR tokens to U.S. investors. SEC staff served both Terraform Labs and Kwon with investigative subpoenas requiring the production of certain documents and compelling Kwon's testimony. However, despite numerous attempts to negotiate with counsel, Terraform Labs and Kwon have refused to produce any documents and Kwon has failed to comply with the testimonial obligations.

The SEC's application seeks an order from U.S. District Court for the Southern District of New York directing Terraform Labs and Kwon to show cause why the court should not compel them to produce documents as required by the subpoenas and compel Kwon to appear for testimony. The application further seeks an order from the court, following its ruling on the order to show cause, directing Terraform Labs and Kwon to comply fully with the subpoenas. The SEC is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity has violated the federal securities laws.