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Trial Against Terraform Labs And Do Kwon Begins In NYC

Trial Against Terraform Labs And Do Kwon Begins In NYC

Julia Smith

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| 2 min read

Illustration of a courtroom with a Bitcoin emblem, symbolizing the trial against Terraform Labs and Do Kwon, set to begin in NYC following his Montenegrin prison release.

Do Kwon’s legal battle begins in NYC’s federal court, spotlighting the fall of TerraUSD and its sweeping impact on the crypto industry. Image by Julia Smith, Midjourney.

The United States Securities and Exchange Commission’s (SEC) trial against Terraform Labs founder Do Kwon is set to begin in Manhattan federal court Monday, though the former crypto tycoon will not be present.

Jury Selection Underway For Kwon’s SEC Trial In NYC

The landmark civil trial stems from the SEC’s original complaint against Kwon in February 2023 over the dramatic May 2022 collapse of Terraform Labs’ TerraUSD “stablecoin,” which led to the loss of over $40 billion in market value.

“As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance,” Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, said in a statement at the time. “It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”

Kwon stands accused of violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act. Despite the high-profile nature of the crime, civil trials typically result in hefty monetary fees or injunctions as opposed to actual prison time for convicted defendants.

U.S. And South Korea Locked Into Legal Battle For Kwon

The start of Monday’s trial comes on the heels of Kwon’s Saturday release from a Montenegrin prison as the Balkan country’s Supreme Court debates his extradition location.

Both the U.S. and Kwon’s native South Korea have been battling for his extradition, causing numerous international legal hurdles regarding the crypto fugitive’s fate.

South Korea originally issued an arrest warrant for Kwon in September 2022 for violating the country’s national markets law, prompting a nearly year-long manhunt for the founder of the Terraform Labs across Europe and Asia.

Kwon was finally detained in Montenegro in March 2023 for attempting to use a fake Costa Rican passport to fly to Dubai following multiple attempts to track him down, including an Interpol red notice for his arrest.

He was ordered to serve four months in Montenegro’s Spuž Prison on document forgery charges. Following his release over the weekend, officials barred Kwon’s passport from being used in hopes of preventing him from fleeing the country.

Terra Collapse Was A Tipping Point For Crypto

The collapse of Terra is regarded by many to have caused major damage to the cryptocurrency ecosystem, with blockchain analytics firm Nansen alleging the collapse set off crypto exchange FTX’s ultimate demise.

FTX founder, Sam Bankman-Fried, is expected back in Manhattan federal court later this week to be sentenced following his November 2023 crypto fraud conviction.

It is currently unclear when Kwon’s extradition will be, much less where.

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