Terraform Labs CEO Do Kwon is suing the U.S. Securities and Exchange Commission (SEC).
The builder of decentralized finance (DeFi) platform Terra confirmed he was served with an SEC subpoena at Messari’s Mainnet conference last month, according to a lawsuit filed Friday by both Kwon and Terraform Labs.
The matter stretches back to May 2021, when SEC’s Enforcement Division emailed Kwon, according to the filing.
At issue is Terra’s Mirror Protocol, a decentralized finance (DeFi) platform on which synthetic stocks mirroring the price of major U.S. firms are minted and traded.
Read more: Terra Brings 24-Hour Trading to Synthetic Versions of Stocks Like TSLA and AAPL
The subpoena requests that Kwon provide testimony to U.S. regulators. As a resident of South Korea, Kwon is contesting that.
Terraform’s suit against the SEC is unusual but, according to Anderson Kill lawyer Stephen Palley, preemptive legal action might make sense in this case.
“It’s a reminder to regulators that there are rules of engagement that they need to abide by as well,” Palley told CoinDesk.
The SEC told Terraform’s lawyers that the U.S. regulator might sue the company.
“In a conversation on September 15, 2021, the SEC attorneys advised that they believe that some sort of enforcement action was warranted against TFL [Terraform Labs] and any cooperation, and implementation of remedial actions as to the Mirror Protocol, would result in a reduced financial sanction as part of any consent agreement,” the suit said.
Five days later, Kwon was served.
“The subpoenas were served on Mr. Kwon in public: Mr. Kwon was approached by the process server as he exited an escalator at the Mainnet summit while on his way to make a scheduled presentation that was not about the Mirror Protocol,” the suit said.
It appears to confirm a tweet by Indiegogo founder Slava Rubin who claimed to witness the event:
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
Kwon told The Defiant later that day that he had not been served.
Telegram messages sent to Kwon were not returned.
Nikhilesh De and Cheyenne Ligon contributed reporting.