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SEC v.s. Terraform Labs trial pushed to March to potentially accommodate Do Kwon

SEC v. Terraform Labs trial postponed to March 25. Do Kwon's extradition process from Montenegro to the U.S. is key to his in-person defense. The lawsuit, alleging securities fraud involving UST and Terra Luna, is a pivotal case in crypto regulation.

The Terraform Labs co-founder is still in Montenegro following his prison sentence and reportedly awaits extradition to the United States.

A federal judge has ordered the United States Securities and Exchange Commission case against Terraform Labs to be pushed to March following a request from Do Kwon to assist in his own defense in person.

In a Jan. 16 filing in the U.S. District Court for the Southern District of New York, Judge Jed Rakoff moved the start date of the SEC v. Terraform Labs trial to March 25. The judge added that there was “no absolute guarantee” that Kwon would be released from extradition proceedings in Montenegro in time to appear in person for the trial, but he accommodated a request from his legal team that the SEC join.

The trial had originally been scheduled to begin on Jan. 29, roughly a year after the SEC filed charges against Terraform and Kwon in February 2023. Both parties were alleged to have orchestrated a “multi-billion dollar crypto asset securities fraud” related to the tokens formerly called TerraUSD (UST) and Terra Luna.

The Terra ecosystem collapsed in May 2022, after which Kwon’s whereabouts were largely unknown. Authorities in Montenegro arrested the Terraform Labs co-founder in March 2023 for using falsified travel documents and sentenced him to four months in prison. He remains in the country as extradition proceedings between the U.S. and Montenegro continue at the time of publication.

It’s unclear if Kwon can participate in the SEC case in person, but pretrial motions have been moving forward. In December, Judge Rakoff granted summary judgment in favor of the SEC over Terraform dealing with unregistered securities and in favor of Kwon and Terraform for the offer and sale of security-based swaps.