Legal Challenges Faced by Do Kwon
Do Kwon, a co-founder of Terraform Labs, is currently dealing with significant legal challenges in a federal court in the United States. Recent discussions among attorneys in front of Judge Paul Engelmayer during a status conference revealed potential implications of upcoming legislation on Kwon’s criminal charges, which include securities fraud.
Potential Impact of the GENIUS Act
As the judge noted, the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins) may play a role in shaping the legal landscape surrounding Kwon’s case. This act, which aims to regulate payment stablecoins, successfully passed the Senate on June 17 but awaits a vote from the House of Representatives before it can be enacted into law by President Donald Trump.
Should the GENIUS Act be signed, it could have ramifications for Kwon’s allegations centered on the TerraUSD (UST) stablecoin and the associated LUNA token.
The Collapse of the Terra Ecosystem
The troubles for Kwon began when the value of Terra’s UST lost its dollar peg in 2022, leading to the collapse of the ecosystem and triggering investigations from authorities in both the US and South Korea. In 2023, Kwon was apprehended in Montenegro on charges unrelated to cryptocurrency, with his extradition to the US occurring in December after various legal hurdles.
Facing nine counts including securities fraud and money laundering, Kwon has pleaded not guilty and is currently detained without bail. His upcoming trial is anticipated to commence in January 2026.
Civil Case and Regulatory Implications
In a relevant civil case from 2024, Kwon and Terraform Labs were found liable for investor fraud by the Securities and Exchange Commission (SEC). Judge Engelmayer is now contemplating whether this judgement will affect the ongoing criminal proceedings against Kwon.
The Future of the GENIUS Act
As for the GENIUS Act, its future rests in the hands of the House of Representatives, where it is slowly being reviewed along with the STABLE Act, which seeks to promote transparency and accountability within the stablecoin market. The outcome of these legislative efforts could reshape the regulatory strategy of agencies like the SEC and the Commodity Futures Trading Commission, potentially altering how they approach digital asset cases.
Similar to Kwon, Braden John Karony, a former SafeMoon executive, previously sought to delay his own trial on fraud charges based on anticipated changes in securities law, highlighting the broader impact these legislative developments may have on crypto-related prosecutions.
