Do Kwon and Terraform Labs (TFL), the South Korean company behind the Terra (LUNA) blockchain project, are suing the US Securities and Exchange Commission, the filing last week shows.
The lawsuit comes in response to subpoenas served on the co-founder and CEO of Terraform Labs on September 20, 2021 while attending a cryptocurrency summit in New York City.
TFL and Do Kwon vs. SEC
According to the file, TFL and Do Kwon’s lawsuit against the US regulator consists of “contesting two subpoenas improperly issued and served by the SEC and the SEC’s failure to keep an investigation into the” mirror transcript “confidential, all of which in violation of the due process clause, the rules of the SEC and the APA. “
[8] The Law (continued)
But in doing so, the SEC violated:
the 14th Amendment to the US Constitution;
Section 555 (c) of the Administrative Procedure Act;
Title 17 of the Code of Federal Regulations Section 203.8; and
SEC Practice Rule 150 (b)
– CaesarRichard Nixon Hiram (@caesar_milhous) October 25, 2021
TFL’s Mirror Protocol (MIR) enables users to coin “plastics” that track the prices of real assets such as stocks.
“The subpoenas were served publicly to Mr. Kwon: Mr. Kwon was approached by the process server when he was exiting an escalator at the mainnet summit while he was on his way to give a scheduled presentation that was not about the mirror protocol”, so read the lawsuit.
The filing argues that the US regulator acted “arbitrarily and arbitrarily” because the service of the subpoenas “was intended to improperly secure personal jurisdiction over Mr. Kwon and TFL in a manner that was not legally accessible to the SEC”.
Examination of the mirror log
According to the filing, the issue emerged as early as May 2021 when two lawyers from the SEC’s Enforcement Division emailed Kwon to request his volunteer collaboration on a formal investigation warrant titled “In the Matter of Mirror Protocol.” .
TFL and Kwon appointed Dentons US LLP to represent them in connection with the SEC filing.
Dentons and the SEC attorneys eventually negotiated an agreement that Kwon would be questioned by the SEC, with the SEC agreeing that his statements may not be used directly against him or TFL in a later case.
Following the interview, which took place in July and lasted approximately five hours, the SEC requested that Kwon and TFL voluntarily submit documents.
“Inquiry (1) was partly looking for unavailable documents and (2) was otherwise so extensive and / or inadequate that the inquiries had to be narrowed down and specified, as far as responding documents could be available,” states and added that “communications were made between the SEC and Dentons’ attorneys to establish a common basis for voluntarily providing information in response to the SEC’s request.
During these interviews, Dentons attorneys sought feedback from the US regulator on how the SEC assessed TFL and Kwon in connection with their investigation.
As noted in the filing, “SEC attorneys indicated that they believe that some type of enforcement action against TFL is warranted and that any collaboration and remedial action against the Mirror Protocol will result in a lesser financial penalty under the framework from . would lead to any consent agreement. “
Rather than specifying anything related to the amount of potential financial sanctions or remedial action or further collaboration, Kwon was personally served by a private litigation service company hired by the SEC with subpoenas demanding documents and Kwon’s personal testimony in Washington. DC
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