Recently, Terraform Labs CEO Do Kwon suffered from legal persecution at the hands of the SEC. The SEC lawyers maintained in the court that Do Kwon and his firm ignored the official summons to the court. On the other hand, Kwon and his company have maintained that he had not received any summons or subpoenas by the regulator.
Kwon recently told media that when the subpoena arrived, he was preparing to go on stage at the Mainnet Conference. His lawyers recently told the media that it is not justified for the SEC to serve a legal notice to Kwon, considering that he is not a US citizen. He also claimed that he never lied about the subpoena to the media since he was not notified about the matter properly, making the serving process invalid.
In response to the argument by TFL lawyers, SEC prosecutors claimed that the jurisdiction of the agency is supranational and extends to the regions outside of the United States. With this new lawsuit, SEC seems to set a precedent for the stablecoin issuers in the country that are planning to keep operating in the country from foreign countries in case of a possible ban.
However, the validation of jurisdiction has changed the dynamics of the case completely. Anderson Kill partner Preston J. Byrne recently told media that SEC has a limitation of jurisdiction when it comes to foreign companies and individuals. He further claimed that just because the TFL website is available to residents of New York, it does not translate that SEC can extend its regulatory dominion on the company.
Delphi Lab advocate Gabriel Shapiro recently tweeted that SEC has no way of proving that the TFL has tried to sell unregistered securities in the country by mining tokens through computer software. It seems that the lack of clear regulations towards DeFi-based projects is the main cause of contention in this situation.
The current laws that provide a basis for SEC to prosecute the companies were generated for the stock market, which works very differently from cryptocurrencies. The peer-to-peer trust system that puts people in charge of the blockchain transaction is something new that requires a specified set of rulings for the sector.