Do Kwon Trial Update: What You Need to Know
Do Kwon, co-founder of Terraform Labs, is set to go on trial on Jan. 26, 2026, following his extradition to the US. The latest status conference revealed key details about the case, as reported by Inner City Press on Jan. 8.
Pretrial Conference and Plea Discussions
The court has scheduled a pretrial conference for Mar. 6, 2025, with updates due by Feb. 27. Judge Paul Engelmayer has encouraged plea discussions, although both parties anticipate that the case will proceed to trial.
Fraud Allegations and Terraform’s Operations
Federal prosecutors have accused Terraform’s ecosystem of being built on deceptive practices. Assistant US Attorney Jared Lenow referred to Terraform’s operations as a “Potemkin village,” claiming that the company’s products were unstable and required manipulation to maintain their value. Specifically, Kwon is alleged to have misrepresented the stability of the algorithm stablecoin TerraUSD (UST).
Defense Arguments and Challenges
On the defense side, led by attorney Michael Ferrara, it is argued that Terraform’s products were legitimate and functioned as described until market sentiment shifted. The defense contends that TerraUSD’s stability depended on demand, which diminished during a panic.
“As long as people wanted it, it would be stable.”
The defense also plans to challenge the admissibility of evidence obtained through international cooperation and search warrants.
Key Points of the Trial
The trial is expected to last four to six weeks and will delve into fundamental questions about crypto’s classification under US law. Prosecutors argue that LUNA, Terra’s native token, should be classified as a security, a stance that could have significant implications for the crypto industry. However, defense attorneys counter that Terraform’s tokens do not meet the criteria set by the Howey Test for securities.
Evidence and Legal Challenges
The case involves a vast amount of evidence, including six terabytes of data from seized devices, emails, Slack communications, trading records, and video statements. Both the prosecution and defense acknowledge the logistical challenges posed by this extensive evidence. The government has promised to promptly provide discovery materials, but the complexity of the case remains a significant factor.
Judge Engelmayer highlighted the need for transparency and fairness in handling the evidence, noting potential complications from overlapping civil and criminal cases related to Terraform Labs. Do Kwon’s legal team faces additional challenges from ongoing investigations and potential prosecutions in South Korea.
Kwon is accused of orchestrating a crypto fraud scheme that led to over $40 billion in losses when LUNA and TerraUSD collapsed in May 2022. Following his capture in Montenegro in March 2023, Kwon remained in custody for nearly two years before being extradited to the US on Dec. 27, 2024.
During a court appearance on Jan. 2, Kwon pleaded not guilty to charges related to the collapse of the Terra ecosystem.
