Terraform Labs’ $40-Billion Crypto Fraud Trial: Unraveling the Saga of TerraUSD’s Collapse and the Fate of Luna Token
The US Securities and Exchange Commission (SEC) has approved a postponement of the civil trial involving Terraform Labs and co-founder Do Kwon, who are accused of orchestrating a massive $40 billion cryptocurrency fraud. The delay is intended to facilitate Kwon’s extradition, allowing his attendance at the trial. In a filing on Monday in Manhattan federal court, the SEC justified the “modest” adjournment, citing Kwon’s expressed desire to attend the trial, his agreement to extradition from Montenegro, and the potential for his arrival in the United States by mid-March.
Additionally, the SEC opposed the notion of separate trials for Terraform Labs and Kwon, asserting that the cases were substantially identical. The regulatory body argued that conducting two separate trials would unnecessarily compel whistleblowers and regular retail investors to testify twice, adding an undue burden to the legal proceedings. The trial, initially scheduled for January 29, is now subject to the extradition timeline and the court’s considerations regarding the case’s complexity and efficiency.
US District Judge Jed Rakoff will decide whether to move the trial date. The SEC asked for April 15, to accommodate scheduling conflicts.Kwon’s lawyer sought a delay until at least March 18, and on Monday said he would not seek further adjournments even if Kwon were unable to attend on the new date.
The case stems from 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 in May 2022 proved unable 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.
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 his native South Korea. He was arrested in Montenegro last March.The case is SEC v Terraform Labs Pte Ltd et al, US District Court, Southern District of New York, No. 23-01346.