- Do Kwon will face trial in January 2026 for alleged fraud tied to the collapse of Terraform Labs.
- Prosecutors claim Terraform’s products were unstable and required manipulation to maintain their value.
- The trial will examine crypto’s legal status as prosecutors argue LUNA qualifies as a security.
Terraform Labs co-founder Do Kwon will face trial on January 26 next year. This follows his extradition to the United States earlier this year. This date was set during a status conference held on January 8, according to Inner City Press.
A pretrial conference is scheduled for March 6, 2025, with updates required by February 27. The court, led by Judge Paul Engelmayer, has encouraged plea negotiations. However, both sides expect the case to proceed to trial.
Prosecution Alleges Deception in Terraform Operations
Federal prosecutors argue that Terraform Labs operated on misleading foundations. Assistant U.S. Attorney Jared Lenow referred to the ecosystem as a Potemkin village, asserting that its products were unstable and required manipulation to maintain value. Prosecutors also allege that Kwon misrepresented the stability of TerraUSD (UST), the ecosystem’s algorithmic stablecoin.
The indictment outlines multiple fraud and securities violations. These charges include Kwon’s alleged misrepresentation of TerraUSD’s stability and other aspects of Terraform’s operations.
Defense Challenges Allegations and Evidence
The defense, led by attorney Michael Ferrara, contends that Terraform’s products were legitimate and functional until market sentiment shifted. They argue that TerraUSD’s stability depended on demand, which collapsed during a panic.
Additionally, the defense plans to challenge the admissibility of evidence obtained through international cooperation and search warrants. The case involves extensive evidence, including six terabytes of data from emails, Slack communications, trading records, and videos. Some recordings were made without Kwon’s knowledge, raising procedural concerns.
Impact on Cryptocurrency Regulation
The trial, expected to last four to six weeks, will address critical questions about cryptocurrency classification under U.S. law. Prosecutors claim that Terraform’s native token, LUNA, qualifies as a security.
This contention could have broad implications for the crypto industry. Defense attorneys dispute this, arguing the tokens fail to meet the Howey Test criteria for securities.
Complex Legal Proceedings
Judge Engelmayer acknowledged the challenges posed by the case’s extensive evidence and overlapping civil and criminal cases. He also referenced related rulings on crypto regulation.
Kwon remains in custody in a New Jersey facility. His legal team is also addressing investigations and potential prosecutions in South Korea, adding complexity to his defense.
Kwon faces allegations of orchestrating a crypto fraud scheme that caused over $40 billion in losses during the LUNA and TerraUSD collapse in May 2022.
The post Terraform Labs Co-Founder Do Kwon to Stand Trial in US on January 26, 2026 appeared first on Cryptonewsland.
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