Terraform Labs co-founder Do Kwon is scheduled to be tried on Jan. 26, 2026, based on a standing convention following his extradition to the US, Interior Metropolis Press reported on Jan. 8.
The court docket has scheduled a pretrial convention for Mar. 6, 2025, with updates due by Feb. 27. Choose Paul Engelmayer has inspired plea discussions. Nevertheless, each events anticipate the case will proceed to trial.
Federal prosecutors argued that the Terraform ecosystem was constructed on misleading practices. Assistant US Legal professional Jared Lenow described Terraform’s operations as a “Potemkin village,” alleging that the corporate’s merchandise have been unstable and required manipulation to maintain their worth.
He added that Kwon misrepresented the soundness of the algorithm stablecoin TerraUSD (UST).
The indictment outlines a number of fraud and securities violations, together with counts pertaining to Kwon’s alleged misrepresentation of TerraUSD’s stability. Earlier counts deal with different features of Terraform’s operations.
The protection, led by legal professional Michael Ferrara, argues that Terraform’s merchandise have been respectable and functioned as described till market sentiment shifted. Ferrara contended that TerraUSD’s stability relied on demand, which evaporated throughout a panic.
He added:
“So long as folks wished it, it will be secure.”
The protection additionally plans to problem the admissibility of proof obtained by worldwide cooperation and search warrants.
Month-to-month size
The trial, anticipated to final 4 to 6 weeks, will deal with foundational questions on crypto’s classification underneath US legislation. Prosecutors assert that LUNA, Terra’s ecosystem native token, qualifies as a safety, a competition that might have far-reaching implications for the crypto trade.
Protection attorneys, nevertheless, argue that Terraform’s tokens don’t meet the standards established underneath the Howey Check for securities.
Choose Engelmayer remarked on the broader authorized ferment surrounding crypto regulation, referencing current rulings in different circumstances, together with a willpower that a few of Terraform’s crypto belongings have been funding contracts.
Big quantity of proof
The case includes huge proof, together with six terabytes of information from seized units, emails, Slack communications, buying and selling information, and video statements.
The federal government has pledged to offer discovery supplies promptly, however either side acknowledged the logistical complexity. The proof contains recordings made with out Kwon’s information, which can elevate procedural questions.
In consequence, Choose Engelmayer described reviewing such intensive materials as “daunting” however emphasised the necessity for transparency and equity in discovery. He additionally highlighted potential issues from overlapping civil and legal circumstances, together with a previous US Securities and Trade Fee lawsuit towards Terraform Labs.
Do Kwon stays in custody and is at the moment held at a facility related to Essex County, New Jersey. His authorized staff additionally navigates ongoing investigations and potential prosecutions in South Korea, including one other layer of complexity to his protection technique.
Kwon faces allegations of orchestrating an alleged crypto fraud scheme that brought on over $40 billion in losses when the tokens LUNA and TerraUSD collapsed in Might 2022.
After the collapse, Kwon stayed on the run for almost a 12 months earlier than being apprehended in Montenegro in March 2023 whereas trying to journey on a pretend passport.
Kwon remained in Montenegrin custody for almost two years whereas a battle for extradition between the US and South Korea occurred. On Dec. 27, 2024, Montenegro’s Justice Minister ended the tug-of-war by signing an order to extradite Do Kwon to the US.
In a Jan. 2 look in court docket, Kwon pleaded not responsible over Terra ecosystem collapse.
