The U.S. Securities and Exchange Commission (SEC) has concurred with the lawyers of Terraform Labs co-founder Do Kwon on commencing the trial following his extradition. In a recent filing dated January 15 with the Southern District Court of New York, the SEC expressed readiness to proceed with Kwon's trial, initially set for January 29. However, they also proposed postponing the start date to no earlier than March 18. Currently, Kwon is facing legal challenges regarding his extradition to the U.S. while he remains in Montenegro, where he was apprehended in March 2023.
The SEC filing mentioned agreement with Kwon's plea for a brief delay, allowing him to actively participate in the trial. The SEC suggested an alternative trial date of April 15, 2024, if a postponement is granted. Kwon's legal representatives had earlier requested Judge Jed Rakoff to delay the January trial, citing slower-than-expected extradition proceedings since Kwon's detention in Montenegro.
Despite agreeing to a potential trial delay, the SEC opposed separating Kwon's trial from the broader case against Terraform Labs. Both Kwon and Terraform were charged in February 2023 with conducting a "multi-billion dollar fraud" involving tokens previously known as TerraUSD (UST) and LUNA, labeled as “U.S. Dollar Crypto-Asset Securities Fraud”.
The SEC argued against two separate trials, pointing out that it would unnecessarily burden witnesses, including whistleblowers and financially constrained retail investors, who would have to testify twice on the same issues in different trials.
The collapse of the Terra ecosystem in May 2022 was a significant event in the crypto market downturn, with TerraUSD losing its peg to the U.S. dollar. This event precipitated the bankruptcy of several crypto firms, including Voyager Digital, BlockFi, Celsius Network, and FTX.
While Kwon’s physical presence is still pending, pretrial motions in the SEC case continue to advance. In December
, Judge Rakoff ruled in favor of the SEC in a summary judgment regarding Terraform's management of unregistered securities. However, the judgment also favored Kwon and Terraform concerning the allegation of offering and selling securities-based swaps.
The ongoing case and the proposed trial dates highlight the complexities involved in legal proceedings against figures in the cryptocurrency industry, especially when international extradition is involved. The outcome of this case is anticipated to have significant implications for the crypto market and regulatory landscape.
