The Long-Awaited Fraud Trial Against Terraform Labs and Do Kwon May Soon Proceed
The Securities and Exchange Commission (SEC) has sued Terraform Labs and its cofounder Do Kwon for a $40 billion cryptocurrency fraud. The fraud is related to the collapse of stablecoin Terra USD in May 2022. Kwon was arrested in Montenegro but has managed to delay his extradition to the US.
SEC Agrees to Delay the Civil Trial
- The SEC has agreed to delay the civil trial against Terraform Labs and Do Kwon to April 15th to allow time for Kwon’s extradition from Montenegro.
- Kwon has agreed to extradition and could arrive by mid-March.
- The judge has not yet agreed to the trial delay.
- The SEC opposes holding separate trials for Terraform Labs and Kwon.
- An appeals court in Montenegro overturned the ruling for Kwon’s original extradition date in December.
In a recent filing, the SEC explained that it is willing to delay the trial date to April 15th because Kwon has agreed to be extradited by mid-March. The agency believes this short postponement is necessary to ensure Kwon’s presence in court, as he has expressed a desire to attend.
Judge Will Decide on Trial Date and Separate Court Dates
Judge Jed Rakoff will make the final determination on the trial date and whether separate court dates for Kwon and Terraform Labs are warranted. The SEC opposes separate trials, stating that the cases and allegations against both defendants are virtually identical. Holding separate trials would burden whistleblowers and defrauded investors with repeat testimonies, according to the agency.
Appeals Court Overturned Extradition Decision
Kwon was originally scheduled for extradition in late 2022, but an appeals court in Montenegro overturned the ruling due to procedural breaches. This cleared the path for Kwon to be transported to the US to stand trial in the SEC civil suit.
Potential Consequences for Terraform Labs and Do Kwon
If found guilty of defrauding investors by concealing the risks of Terra USD, Terraform Labs and Kwon may face disgorgements and financial penalties. Kwon also faces separate criminal charges in South Korea and potential extradition there after the US legal proceedings conclude.
Hot Take: The Impending Trial Against Terraform Labs and Do Kwon
The long-awaited fraud trial against Terraform Labs and Do Kwon may finally proceed if the judge approves a requested delay. The SEC has agreed to postpone the civil trial to allow for Kwon’s extradition from Montenegro. While Kwon has agreed to be extradited, the judge has not yet decided on the trial delay or whether separate court dates are necessary. The SEC opposes separate trials, arguing that the cases are virtually identical. If found guilty, Terraform Labs and Kwon could face significant penalties and disgorgements. As this high-stakes trial looms, all eyes are on Judge Rakoff’s final determination.
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