The United States Securities and Exchange Commission (SEC) has supported the lawyers of Terraform Labs co-founder Do Kwon in their request to schedule a trial following Kwon's extradition. In a recent filing with the U.S. District Court for the Southern District of New York on January 15, the SEC expressed its readiness to proceed with Kwon's trial, originally set for January 29. However, they also proposed delaying the start date to no earlier than March 18. Kwon's legal team is currently addressing the challenges related to his extradition to the U.S., as Kwon remains in Montenegro following his arrest there in March 2023.
The SEC filing stated, "The SEC agrees with Mr. Kwon's request for a modest adjournment to enable his participation in the trial." They suggested a new trial start date of April 15, 2024, if the trial is postponed. This comes after Kwon's attorneys requested a delay in the January trial in a letter to Judge Jed Rakoff on January 11, citing slower than expected extradition proceedings since Kwon's detention in Montenegro.
While the SEC is open to potentially delaying the trial, they objected to separating Kwon's case from their broader case against Terraform Labs. Both Kwon and Terraform Labs were charged in February 2023 by the SEC for allegedly conducting a "billion-dollar fraud" involving the tokens previously known as TerraUSD (UST) and LUNA, labeled as a U.S. dollar crypto-asset securities fraud.
The SEC argued against holding separate trials for Kwon and Terraform, stating it would unnecessarily compel witnesses, including SEC whistleblowers and retail investors, to testify twice about the same facts. The collapse of the Terra ecosystem in May 2022, which led to TerraUSD losing its peg to the U.S. dollar, was a pivotal event in the cryptocurrency market downturn, resulting in the bankruptcy of several crypto firms like Voyager Digital, BlockFi, Celsius Network, and FTX.
Despite Kwon's inability to attend in person, pretrial activities in the SEC case continue. In December, Judge Rakoff ruled in favor of the SEC regarding Terraform's management of unregistered securities and in favor of Kwon and Terraform on the offering and sale of securities-based swaps.
