The United States Securities and Exchange Commission (SEC) has agreed to postpone a civil trial against Terraform Labs and co-founder Do Kwon for allegedly orchestrating a $40 billion (roughly Rs. 3,32,329 crore) cryptocurrency fraud. This delay is to allow Kwon to be extradited and attend the trial.
In a filing in Manhattan federal court on Monday, the SEC stated that a “modest” adjournment of the January 29 trial was justified, based on statements from Kwon’s lawyer that Kwon wanted to attend, agreed to extradition from Montenegro, and could be in the United States by mid-March. The SEC also opposed separate trials for Terraform and Kwon, citing the similarity of the cases and the inconvenience it would cause to whistleblowers and ordinary retail investors.
The decision on moving the trial date rests with US District Judge Jed Rakoff, with the SEC requesting a new trial date of April 15 to accommodate scheduling conflicts. Kwon’s lawyer has requested a delay until at least March 18, and has committed to not seeking further adjournments even if Kwon is unable to attend on the new date.
The case revolves around the collapse of TerraUSD, a stablecoin designed to maintain a constant $1 price, and Luna, a more traditional token closely linked to TerraUSD. Both cryptocurrencies lost an estimated $40 billion or more when TerraUSD proved unable to maintain its $1 peg in May 2022. The SEC alleges that Terraform and Kwon deceived investors about the stability of TerraUSD and its use in a popular Korean mobile payment app.
Last month, Rakoff ruled that Terraform and Kwon violated US law by failing to register TerraUSD and Luna. Kwon also faces related US criminal charges and an extradition request from South Korea. He was arrested in Montenegro last March.
The case is known as SEC v Terraform Labs Pte Ltd et al, US District Court, Southern District of New York, No. 23-01346. © Thomson Reuters 2024
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In conclusion, the decision by the US Securities and Exchange Commission to postpone the $40-billion crypto fraud trial against Terraform Labs provides a temporary reprieve for the company as it continues to navigate the legal challenges it faces. This delay allows for further evaluation and consideration of the complex issues at hand, and provides an opportunity for all parties involved to proceed with a fair and just legal process. It also highlights the increasing scrutiny and regulation of the cryptocurrency industry by government agencies, underscoring the importance of transparency and compliance in this rapidly evolving sector.