The Terra implosion has reportedly attracted scrutiny from the U.S. SEC
Terraform Labs has lost its appeal against the Securities and Exchange Commission, meaning the firm must respond to the SEC’s subpoenas. The decision is an important step in establishing the jurisdiction of US regulators and courts over the firm, especially as reports emerge that the SEC is investigating the collapse of stablecoin TerraUSD.
SEC investigating $60B Terra implosion
The US Securities and Exchange Commission has opened an investigation into the Terra explosion, according to Bloomberg. The securities watchdog is working to determine if Terraform Labs, a failed blockchain developer, violated federal investor protection rules.
Terraform Labs is unaware of Terra’s LUNA cryptocurrency investigation. On Wednesday, Terra co-founder Do Kwon lost his appeal to block the agency’s subpoena for another ongoing investigation into Mirror Protocol. Kwon was served by the SEC right before a crypto conference last November. The SEC is investigating whether the Mirror Protocol, which allows the issuance of synthetic assets representing shares of large companies, violated securities laws. The controversial founder decided to sue the agency, accusing it of violating its own rules by improperly serving subpoenas. It also argued that the agency’s jurisdiction was limited because Terraform Labs was established in South Korea.
However, the Court of Appeals for the Second Circuit ruled that the SEC subpoena was valid. Therefore, Terraform Labs must cooperate with the regulator. Several ongoing SEC investigations add to the range of legal troubles facing Terraform Labs and Kwon.
The South Korean authorities also got involved in the failed crypto project. Local police are investigating allegations of embezzlement against an unnamed employee.
Meanwhile, Terraform Labs co-founder Daniel Shin denied the fraud allegations, insisting that the company never intended to scam users.
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