Here’s Why Terra And Do Kwon Cannot Prevent Themselves From Falling Under The Regulatory Purview of US SEC

Terra’s Operations Fall Under the Regulatory Purview of the US Securities and Exchange Commission (SEC) by US laws.

Contrary to arguments that the SEC does not have jurisdiction over Terra, the regulator has the right to investigate the company based on the reasons.

There has been a debate about whether the Securities and Exchange Commission (SEC) has the right to investigate TerraForm Labs (TFL) and its CEO, Do Kwon.

Debate Over SEC’s Jurisdiction Over Terra

It is noteworthy that the debate started following news that a United States Court of Appeal dismissed moves made by Kwon and the company to stop the SEC from investigating Terra.

The debate was mainly held on Twitter, with many users saying the company does not fall under the regulatory purview of the SEC because it is not based there.

Terra Falls Under SEC’s Oversight

In contrast to this argument, the Securities and Exchange Commission has the right to investigate TFL’s execs and operations for multiple reasons.

First) Terra’s tokens, including UST and LUNA, were sold across different exchanges in various parts of the world, including the United States. Exchanges such as Binance.US, Coinbase, and Gemini had Terra ecosystem tokens listed on their trading platforms before the devastating crash occurred.

Second) The vast majority of users on these U.S.-based exchanges are mainly citizens of the country, and they also had a fair share of the massive plunge in Terra ecosystem tokens.

Third) Throughout TFL’s operation, the firm had a significant number of U.S.-based employees and law firms under its payroll, which further exposed the company to regulatory oversight of the Securities and Exchange Commission.

As reported, some of Terra’s employees resident in the United States revealed to the Securities and Exchange Commission that the company Kwon was involved in a massive money laundering scheme that saw him cash out $80 million weekly to foreign accounts.

Furthermore, Terra’s stablecoin TerraUSD (UST) was pegged to the United States Dollar on a 1:1 ratio, which gave many U.S. investors the idea that the token can be trusted, thus luring more people into adopting the digital currency.

Bloomberg confirms the reports that the “US Securities and Exchange Commission is investigating whether the marketing of the TerraUSD stable coin before it crashed last month violated federal investor-protection regulations.”

Following a 1946 US Supreme Court ruling, an asset class has been deemed a security if investors purchase it to fund a company and “with the intention of profiting from the efforts of those involved in it.” Furthermore, the SEC has also asserted that holding assets on certain occasions may see a crypto firm face investment-company structures.

With the U.S. Court of Appeal ordering Terra and its executives to heed the subpoena from the SEC in another crypto project Mirror Protocol, it is only advisable that they comply before things get complicated, especially as the project is trying to recover from the losses it suffered last month.

While Terra is avoiding the SEC’s subpoena, TFL is being heavily investigated for different issues, including reports that the company embezzled its Bitcoin reserves.

The US is very strict in protecting investors and there are zero chances Terra is going to prevent herself from SEC wrath. Meanwhile, news of the Terra tokens crash is no longer new as many investors are yet to recover from the devastating losses they suffered last month.