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The legal proceedings against Terraform, which caused significant fear and anxiety in the crypto market following the bankruptcy process in May 2022, continue. A Federal judge has decided to postpone the United States Securities and Exchange Commission (SEC) lawsuit against Terraform Labs to March, following Do Kwon’s request to personally assist in his defense.
How Does the Process Continue?
Judge Jed Rakoff, of the U.S. District Court for the Southern District of New York, moved the start date of the trial between the SEC and Terraform Labs to March 25 with an application made on January 16. The judge added that there was no absolute guarantee that Kwon would be released in time to attend the hearing in person from extradition proceedings in Montenegro, but he accepted the legal team’s request for the SEC to participate.
The hearing for the lawsuit was initially planned to start on January 29, about a year after the SEC filed a complaint against Terraform and Kwon in February 2023. Both parties had previously been accused of organizing multi-billion dollar securities fraud involving crypto assets formerly known as TerraUSD (UST) and Terra.
The Terra ecosystem went bankrupt following the loss of value in UST in May 2022, and since then, Kwon’s whereabouts were unknown. Authorities in Montenegro arrested the Terraform Labs co-founder in March 2023 for using fake travel documents and sentenced him to four months in prison. Kwon continues to stay in Montenegro as extradition proceedings between the U.S. and Montenegro are ongoing.
Terraform and Legal Regulations
It is unclear whether Kwon will be able to personally attend the SEC case, but pre-trial motions are progressing. In December, Judge Rakoff ruled in favor of the SEC regarding Terraform’s service of unregistered securities and in favor of Kwon and Terraform regarding the offer and sale of securities-based swaps.
Following these developments, many governments have started to take striking steps against crypto companies. The U.S., along with many other developed countries, has imposed strict conditions on legal regulations for crypto companies, which has caused a significant stir in the crypto market.
