In a recent development, US District Judge Jed Rakoff in Manhattan has decided to postpone the trial of Terraform Labs and its co-founder Do Kwon, who are facing allegations of a $40 billion cryptocurrency fraud.
The trial was initially scheduled to begin on January 29 but has now been rescheduled to March 25. The reason behind this delay is to allow for the extradition of Do Kwon from Montenegro, where he is currently being held, to ensure his presence during the trial.
No further delays despite uncertainties
Despite Do Kwon’s representation that he has consented to his extradition from Montenegro, Judge Rakoff emphasized that there is no guarantee that he will be released in time. However, the judge acknowledged the request from Do Kwon’s counsel to delay the trial, given the recognition that it cannot be postponed any further.
Therefore, the trial is now set for March 25, and no further delays will be entertained, even if Do Kwon’s extradition does not occur as anticipated.
SEC’s civil case against Terraform and Do Kwon
The Securities and Exchange Commission (SEC) has filed a civil case against Terraform Labs and Do Kwon, stemming from the collapse of TerraUSD, a “stablecoin” designed to maintain a constant $1 price, and the more traditional token Luna, which was closely linked to TerraUSD. Both cryptocurrencies suffered significant losses, estimated at $40 billion or more, when TerraUSD failed to maintain its $1 peg in May 2022.
The SEC alleges that Terraform and Do Kwon deceived investors about the stability of TerraUSD and how a popular Korean mobile payment app used the Terraform blockchain to settle transactions. These allegations have led to a legal battle between the SEC and the accused parties.
Do Kwon has been held in Montenegro since his arrest in March of last year? In addition to the SEC’s civil case, he faces related U.S. criminal charges and an extradition request from his native South Korea. These legal challenges have made his extradition a critical factor in the upcoming trial.
Previous rulings against Terraform and Do Kwon
Last month, Judge Rakoff ruled that Terraform Labs and Do Kwon had violated U.S. law by failing to register TerraUSD and Luna. This ruling added further weight to the SEC’s case against the defendants, demonstrating that their actions had exceeded regulatory requirements.
The delay in the trial has both legal and financial implications. On the legal front, it allows more preparation time and ensures that Do Kwon can be present to defend himself in court. On the financial side, the outcome of this trial could have significant repercussions for the cryptocurrency industry, particularly in terms of how stablecoins and related projects are regulated.
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The postponement of the SEC trial against Terraform Labs and Do Kwon has raised questions about the outcome and its potential impact on the cryptocurrency market. While the delay provides an opportunity for Do Kwon’s extradition, it also prolongs the uncertainty surrounding this high-profile case. Investors and industry stakeholders will closely monitor developments as the new trial date approaches.
The SEC’s allegations of a $40 billion cryptocurrency fraud highlight the need for increased oversight and regulation in the rapidly evolving cryptocurrency space. Terraform Labs and Do Kwon’s case serves as a reminder that even innovative and promising projects can face legal challenges if they fail to comply with existing regulatory frameworks.
