Co-founder of Terraform Labs Do Kwon to face trial.
Do Kwon, co-founder of Terraform Labs, is set to face trial on January 26, 2026, following his extradition to the United States.
A pretrial conference is scheduled for March 6, 2025, with updates expected by February 27. Judge Paul Engelmayer has encouraged discussions for a plea deal, but both sides believe the case will go to trial.
Federal prosecutors accuse Kwon of running a deceptive operation, claiming the Terraform ecosystem was unstable and manipulated. They allege he misrepresented the stability of the algorithmic stablecoin, TerraUSD (UST). The indictment includes multiple fraud and securities violations linked to these claims.
Kwon’s defense, led by attorney Michael Ferrara, argues that Terraform’s products were legitimate and functioned as intended until market conditions changed. Ferrara stated that TerraUSD’s stability depended on demand, which collapsed during a market panic. The defense also plans to challenge the legality of evidence obtained through international cooperation.
The trial is expected to last four to six weeks and will explore the classification of cryptocurrencies under U.S. law. Prosecutors argue that LUNA, the native token of Terraform, qualifies as a security, which could significantly impact the crypto industry. The defense contends that Terraform’s tokens do not meet the criteria for securities as defined by the Howey Test.
The case involves a vast amount of evidence, including six terabytes of data from various sources. Judge Engelmayer noted the challenges of reviewing such extensive material while ensuring fairness in the discovery process.
Kwon remains in custody in New Jersey and faces additional investigations in South Korea related to the collapse of LUNA and TerraUSD, which resulted in over $40 billion in losses. Kwon was apprehended in Montenegro in March 2023 after evading authorities for nearly a year. He pleaded not guilty in court on January 2, 2024.
Terra Luna is currently trading at around $0.4278, down by over 13% in the past 24 hours.
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