SEC sues Terra developer and CEO, alleging involvement in Mirror (MIR) token issuance and promotion

In the third quarter, the emerging public chain Terra LUNA, which was reported to be under investigation by the SEC, has now been officially subpoenaed by the SEC against CEO Do Kwon and its developer Terraform Labs, and enforcement actions will be taken.

Mid-Year Setbacks

According to the document, the SEC previously investigated Mirror Protocol, a synthetic asset protocol under Terra, in May and summoned Terra founder Do Kwon to provide relevant testimony.

As a result, at the end of July, there was an incident where Uniswap removed interfaces for certain tokens in response to regulatory concerns, including synthetic assets, equity tokens, options, and other projects.

SEC's Public Investigation Sparks Controversy

During the Mainnet 2021 summit hosted by blockchain research firm Messari on 9/20, the SEC reportedly engaged with several DeFi project representatives, including Do Kwon.

The Defiant, an external media outlet, reported that Do Kwon denied receiving a subpoena from the SEC at that time. Indiegogo founder Slava Rubin tweeted that he witnessed a project representative receiving a subpoena before going on stage to speak.

lol I just witnessed a guy get served by the SEC at the top of the escalator at #mainnet2021 right before going on stage for his panel

— Slava Rubin (@gogoSlava) September 20, 2021

Terraform Labs Sues SEC

Approximately a month later, developer Terraform Labs and Do Kwon filed a lawsuit against the SEC. According to the document, Do Kwon confirmed receiving a subpoena at the summit in September.

Terraform Labs stated that the SEC violated the confidentiality of the investigation process by hiring third parties to deliver subpoenas in public, creating an atmosphere of intimidation that goes against the principle of keeping formal investigation orders confidential.

SEC Sues Terraform Labs and Do Kwon

In a recent development, despite the developer and Do Kwon refusing to provide any evidence, the SEC intensified its investigation by formally requesting Terraform Labs to submit relevant documents and testimony.

The SEC stated in the document:

The SEC has reason to believe that Terraform Labs and Kwon sold mAssets assets on the Mirror Protocol to U.S. investors and promoted the issuance of MIR.

The SEC emphasized that they have negotiated with lawyers multiple times, but the other party refused to submit any documents. Therefore, they sought a court order to compel Kwon to testify. However, it was mentioned that as of now, no conclusions have been reached regarding any individual or entity violating federal securities laws.

As of now, the Terra LUNA token seems unaffected by the SEC lawsuit and has experienced a slight decline from its historical high of $54.95 on 11/10 to the current level of $49.5 amid market fluctuations.