SEC Supports Do Kwon’s Trial Request Following Extradition to the US

Jimmy Aki
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The U.S. Securities and Exchange Commission (SEC) has approved a postponement for the civil trial of Terraform Labs and its co-founder, Do Kwon. The trial, which accused Kwon of participating in a $40 billion cryptocurrency fraud, is being delayed to ease his extradition process, enabling his presence at the proceedings.

SEC Shuns Separate Trials for Kwon and Terraform

In a filing submitted to the Manhattan federal court on Monday, the U.S. Securities and Exchange Commission (SEC) requested a “modest” postponement of the Jan. 29 trial involving Terraform Labs and co-founder Do Kwon.

This request is based on Kwon’s expressed desire to personally attend the trial, his consent to extradition from Montenegro, and the anticipation of his presence in the United States by mid-March. The defendant’s legal team communicated this intention in a letter to U.S. Judge Jed Rakoff on January 11.

Despite consenting to a trial postponement, the SEC opposed the idea of separate trials for Kwon and Terraform, contending that the cases were identical.

The financial watchdog argued that conducting two trials separately would impose unnecessary burdens on whistleblowers and retail investors, requiring them to testify twice.

Breakdown of Kwon’s Legal Events

In May 2022, the collapse of the Terra ecosystem marked a significant event amid the crypto market downturn that year.

The depegging of TerraUSD from the U.S. dollar resulted in a ripple effect, leading several crypto firms, including Voyager Digital, BlockFi, Celsius Network, and FTX, to subsequently file for bankruptcy.

On February 16, 2023, the SEC filed fraud charges against Kwon for orchestrating a multi-billion dollar crypto-securities fraud linked to the collapse of TerraClassicUSD (USTC) and its associated crypto, Terra Luna Classic (LUNC).

Kwon’s arrest in March 2023 in Montenegro, where he attempted to use falsified travel documents to exit the country, set the legal proceedings in motion.

On November 24, the High Court of Podgorica approved Kwon’s extradition to the U.S. or South Korea, emphasizing that the final decision rested with Montenegro’s minister of justice.

However, on December 19, 2023, the Appellate Court of Montenegro annulled Podgorica’s decision to extradite Kwon, following a request from U.S. and South Korean authorities to extend his detention after completing his sentence.

According to recent reports, Kwon is serving a prison term for passport fraud in Montenegro, which is expected to end by February 15, 2024. This timeline raises the possibility of his release before extradition for the upcoming trial.

Despite the court’s decision, the U.S. and South Korea are actively seeking Kwon’s extradition, and this fuels speculation about the possibility of facing multiple sentences in both countries.

SEC Argues Similarity Between Kwon’s and Binance Litigations

In a filing dated January 3, 2024, the SEC urged a federal judge to consider a summary judgment in its case against the cryptocurrency exchange Binance.

The SEC cited similarities between a December 28 ruling in its case against Terraform Labs and the ongoing legal action against Binance, Binance.US, and former CEO Changpeng Zhao.

In the Terra case, Judge Jed Rakoff largely favored the US agency’s claim, asserting that the platform had offered and sold unregistered securities, including LUNA, TerraUSD (UST), and Mirror (MIR).

Based on this, the SEC argued that the Terraform Labs judgment provided additional grounds to reconsider Binance’s motion to dismiss litigations against trading unregistered securities. The motion was filed in September 2023 by Chanpeng Zhao, the former CEO of the exchange.

This legal development comes on the heels of Binance’s recent $4.3 billion settlement with various U.S. regulatory bodies and Zhao’s guilty plea to a felony count.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.