The U.S. Securities and Exchange Commission (SEC) has agreed to postpone a civil trial against Terraform Labs and its co-founder, Do Kwon. Originally scheduled for February, the trial has been delayed to facilitate Do Kwon’s extradition, allowing his presence at the trial. The SEC alleges that Do Kwon and Terraform Labs orchestrated a $40 billion fraud involving the TerraUSD and LUNA tokens.
The SEC filed in the Manhattan federal court, arguing that a short postponement is justified based on statements from Kwon’s lawyer, indicating Kwon’s willingness to be extradited from Montenegro to the United States, expecting him to be in the U.S. by mid-March.
The SEC opposes separate trials for Terraform Labs and Do Kwon, asserting that the two cases are “virtually identical,” and that having two separate trials would unnecessarily require whistleblowers and retail investors to testify twice. The SEC has requested a new trial date of April 15 due to scheduling conflicts.
Ultimately, U.S. District Judge Jed Rakoff will decide on moving the trial date based on new information from Kwon’s lawyer, who requested a new trial date of at least March 18, emphasizing no further adjournments even if Kwon cannot attend the trial on the new date.
The SEC’s case against Do Kwon and Terraform Labs arises from the collapse of TerraUSD and Luna, causing significant financial losses for investors in the cryptocurrency world. The collapse resulted from TerraUSD’s inability to maintain its peg to the U.S. dollar, triggering a sell-off of Luna.
The SEC alleges that misrepresentations about TerraUSD’s stability and its relationship with the Chai mobile payment app were part of a scheme to manipulate the market for TerraUSD and Luna.
Last month, Judge Rakoff ruled that Terraform Labs and Do Kwon violated U.S. securities laws by failing to register TerraUSD and Luna as securities. In addition to the SEC’s civil charges, Do Kwon faces criminal charges in the U.S. related to the TerraUSD and Luna collapse. He also faces an extradition request from South Korea, where he is a citizen. Kwon was arrested in Montenegro in March 2022.
The SEC’s case is officially called SEC v Terraform Labs Pte Ltd et al, heard in the U.S. District Court for the Southern District of New York with case number 23-01346.
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