The founder of a South Korean blockchain project must comply with a subpoena issued to him by the U.S. Securities and Exchange Commission (SEC), a U.S. court has ruled. The court upheld the SEC’s December motion seeking to force Do Kwon, the founder of Terraform Labs, to comply with a subpoena issued in September last year.
As CoinGeek reported, the SEC served Kwon with a subpoena last year during a blockchain event in New York. The watchdog accused Terraform Labs and its founder of allowing U.S. citizens to trade securities without obtaining the required licensing. Terraform is the company behind Mirror Protocol which allows users to create synthetic assets, or mAssets, which track real-life asset prices, such as stocks.
Kwon fought back and claimed that the regulator had violated his right to due process for serving him a subpoena in public, which he claimed was meant to embarrass him. Further, the SEC doesn’t have any jurisdiction over him or his company as he is South Korean and the company is based in Singapore, he argued in his filing.
Now, the U.S. District Court for the Southern District of New York has sided with the SEC. In a February 17 filing, Judge J. Paul Oetken revealed that he had held a telephone conference with the two factions and explained why he sided with the SEC.
“Terraform and Kwon are hereby ordered to comply with the above-referenced subpoenas,” Judge Oetken stated.
Kwon and his company have 14 days if they are to appeal the order.
The Korean and his company had been the subject of interest for the SEC for months. However, since he resided in Singapore, all the SEC could do was request for his voluntary cooperation. Kwon’s lawyers claimed he spent hours on video calls with the SEC explaining the Mirror Protocol, why mAssets are not securities, and more.
The SEC wasn’t satisfied with his explanation, and just as he was about to take to the stage at Mainnet Conference in New York, an event hosted by digital currency research firm Messari, he was served with the subpoena.
If you’re wondering when I actually decided to run for Senate, it was when these fuckers came to my event, didn’t buy a ticket, and served one of the speakers a subpoena.
More war on our out of control regulatory state.
— Ryan Selkis 📖 🖊🔑 (@twobitidiot) September 20, 2021
What Mirror Protocol offers is no different from Binance’s stock tokens. The embattled exchange had issued tokens on its platform tied to the real-world stock prices of digital currency-related firms like Tesla and Coinbase. Germany’s BaFin was among the first to go after the exchange for these securities disguised as tokens, and other regulators have followed suit. Binance has discontinued the tokens in most markets.
Watch: U.S. Congressman Bill Foster on Bitcoin Association’s Blockchain Policy Matters
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