US SEC trial against Terraform Labs postponed to allow Do Kwon extradition

By Jonathan Stempel

NEW YORK (Reuters) – A federal judge on Tuesday delayed the U.S. Securities and Exchange Commission’s trial against Terraform Labs and co-founder Do Kwon over an alleged $40 billion cryptocurrency fraud, to allow time for Kwon to be extradited so he can attend.

In an order, U.S. District Judge Jed Rakoff in Manhattan pushed back the trial to March 25 from Jan. 29, with no further delays even if Kwon were not extradited.

“Despite Kwon’s representation that he has consented to his extradition from Montenegro, where he is presently being held, there is no absolute guarantee that he will be released in time,” Rakoff wrote.

“Nevertheless,” the judge added, “the court will indulge his counsel’s request given their express recognition that the trial cannot be further postponed.”

The SEC had also agreed to a delay.

Its civil case against Terraform and Kwon stems from the collapse of TerraUSD, a “stablecoin” designed to maintain a constant $1 price, and the more traditional token Luna, which was closely linked to TerraUSD.

Both cryptocurrencies lost an estimated $40 billion or more when TerraUSD in May 2022 failed to maintain its $1 peg.

The SEC said Terraform and Kwon deceived investors about the stability of TerraUSD, and how a popular Korean mobile payment app used the Terraform blockchain to settle transactions.

Kwon has been held in Montenegro since his arrest last March. He also faces related U.S. criminal charges, and an extradition request from his native South Korea.

Last month, Rakoff ruled that Terraform and Kwon violated U.S. law by failing to register TerraUSD and Luna.

The case is SEC v Terraform Labs Pte Ltd et al, U.S. District Court, Southern District of New York, No. 23-01346.