SEC Agrees to Postpone Do Kwon and Terraform Trial until US Extradition Expected in March
Coinspeaker
SEC Agrees to Postpone Do Kwon and Terraform Trial until US Extradition Expected in March
The United States Securities and Exchange Commission (SEC) has agreed to delay the trial of Terraform Labs founder Do Kwon. According to a Monday filing, the trial will not begin until Kwon’s extradition to the US.
The filing, submitted in the US District Court for the Southern District of New York, states that SEC was prepared to begin the trial initially scheduled for January 29. However, the Commission has agreed to postpone the trial to a date not earlier than March 18. According to reports, Kwon’s legal representation is still battling with extraditing the founder from Montenegro to the US. Last year, Kwon was arrested in Montenegro after allegedly trying to travel with falsified documents.
On January 11, Kwon’s lawyers sent Judge Jed Rakoff an official letter requesting the postponement. According to the letter, the lawyers “had hoped the extradition proceedings in Montenegro would proceed more quickly than they have.”
Kwon is expected to appear in the US sometime in March. Consequently, the SEC is okay with starting the trial in April. The court filing reads:
“The SEC joins in Kwon’s request for a modest adjournment so that he may participate in the trial. If the trial date is adjourned, the SEC respectfully requests that trial commence on April 15, 2024.”
SEC Against Separating Terraform and Kwon Charges
While the SEC has agreed with Kwon’s terms, Judge Rakoff must still make a final decision on whether or not to grant the delay request.
The SEC is fine with postponing the trial but is against separating the case against Kwon from the case against Terraform. Both entities are defendants, according to charges brought by the SEC last February. According to the SEC, separating the case would be too hectic. The regulator provided the following explanation:
“Holding two trials would unnecessarily require witnesses, including SEC whistleblowers and retail investors with limited financial means, to testify twice about identical facts in different trials.”
Last year, the SEC accused Kwon and Terraform Labs of “orchestrating a multi-billion dollar crypto asset securities fraud”. According to the SEC, Terraform and Kwon sold crypto asset securities in unregistered transactions without giving the public full and truthful disclosure. In addition, the Commission alleges that the defendants “committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
In May 2022, Terraform’s UST algorithmic stablecoin crashed after it lost its peg to the dollar. The situation also wiped out LUNA’s $40 billion market capitalization, causing problems in the wider crypto sector. The crash led to issues with several firms. They include crypto lender Celsius Network and brokerage firm Voyager Digital. Hedge fund Three Arrows Capital (3AC) also crashed.
In June, a joint report from blockchain security company Uppsala Security and CoinDesk Korea, revealed that Terraform Labs and Do Kwon had nearly $3.6 billion in UST and USDT, used for fraud and market manipulation.
In December 2022, South Korean authorities seized up to 120 billion won ($92 million at the time) in funds connected to Terraform Labs.
SEC Agrees to Postpone Do Kwon and Terraform Trial until US Extradition Expected in March