Shortly after the New York Southern District Court sided with the Securities and Exchange Commission (SEC) in its action against Terraform Labs PTE, Ltd., and its co-founder and CEO, Do Kwon, the defendants have challenged the ruling.

Let’s recall that, in this action, the SEC is seeking to enforce compliance with its subpoenas. The subpoenas concern the SEC’s investigation into the Mirror Protocol. The SEC is investigating whether Terraform Labs, Kwon or others violated the federal securities laws by, among other things, not registering the offer or sale of securities, selling security-based- swaps outside of a national security exchange, acting as an unregistered broker or dealer, or engaging in securities transactions by an unregistered investment company.

Based on its ongoing investigation, the SEC has reason to believe that Terraform Labs and Kwon participated in the creation, promotion, and offer to sell mAssets and MIR tokens to U.S. investors. SEC staff served both Terraform Labs and Kwon with investigative subpoenas requiring the production of certain documents and compelling Kwon’s testimony.

Despite numerous attempts to negotiate with counsel, Terraform Labs and Kwon have refused to produce any documents and Kwon has failed to comply with the testimonial obligations.

On February 17, 2022, the Court issued an order directing the defendants to comply with investigative subpoenas. Now, Terraform Labs and its CEO challenge the order.

The notice of appeal was filed with the Court on February 22, 2022. The related documents are due within 14 days to the Second Circuit Court of Appeals.