The legal battle involving Terraform Labs continues as a federal judge delays the SEC’s lawsuit against the company to March, following a request from Terraform’s co-founder Do Kwon to personally assist in his defense. The initial trial date was set for January 29th, almost a year after the SEC filed charges against Terraform and Kwon for alleged multi-billion dollar securities fraud involving crypto assets formerly known as TerraUSD (UST) and Terra.
Terra’s ecosystem collapsed in May 2022 after a significant devaluation of UST. Kwon’s whereabouts were unknown until his arrest in Montenegro in March 2023 for using fake travel documents, resulting in a four-month prison sentence. Extradition proceedings between the US and Montenegro are ongoing, keeping Kwon in Montenegro.
It remains uncertain whether Kwon will be able to attend the SEC trial in person, but pre-trial motions are progressing. In December, Judge Rakoff ruled in favor of the SEC regarding Terraform’s unregistered securities services and in favor of Kwon and Terraform concerning the offer and sale of securities-based swaps.
Following these developments, governments, especially the US, have started imposing stringent regulations on crypto companies, prompting significant reactions in the crypto market. These measures reflect a growing trend of increased scrutiny and regulatory pressure on the cryptocurrency industry.