Terraform Labs founder Do Kwon’s criminal trial tentatively set for January 26, 2026, a date described by the judge as “unprecedented.” The trial, stemming from the collapse of the TerraUSD stablecoin, could see Kwon facing up to 130 years in prison if convicted.
Kwon appeared in a New York Southern District federal court for a second time on Wednesday, officially entering the discovery phase. He has pleaded not guilty to all nine felony charges related to the alleged Terraform fraud. His extradition from Montenegro, following a lengthy legal battle that also saw South Korea seeking his prosecution, has finally concluded. Notably, he shares the same court with other high-profile cryptocurrency defendants like Sam Bankman-Fried (FTX) and Alex Mashinsky (Celsius).
This “initial conference” aimed to explore plea bargain possibilities and address pre-trial details. Judge Paul Engelmayer, experienced in cryptocurrency cases and known for dismissing a class-action lawsuit against Coinbase, set the trial date for January 26, 2026, explicitly encouraging plea negotiations.
The TerraUSD collapse wiped out approximately US$40 billion in assets, triggering a cascade of failures in the cryptocurrency market in 2022. However, the criminal charges against Kwon center on allegedly making materially false and misleading statements regarding the TerraUSD system, described by prosecutors as a “house of cards.” Prosecutor Jared Lenow highlighted Kwon’s alleged continued promotion of the system’s stability despite knowing its flaws, and his alleged collusion with Jump Crypto to manipulate UST’s price before the collapse, as detailed in the SEC lawsuit.
Kwon’s defense, citing ongoing legal entanglements outside the US, requested at least a year for preparation. The judge acknowledged the “unprecedented” length of time between the initial conference and trial date but granted the request, with prosecutors deeming it not unreasonable.
Prosecutors stated that the evidence submitted totals 6TB, including data from four phones used by Kwon in Montenegrin prison, social media accounts, and other undisclosed materials requiring translation and decryption. Some data may have been obtained without authorization, and some cryptographic keys are reportedly "missing." Prosecutors anticipate a six-week trial, with four weeks allocated to their presentation, mirroring the timeframe of the SBF trial (which commenced nearly 10 months after its initial conference).
Judge Engelmayer also questioned the role of securities law in the case, emphasizing the need for clear explanations to the jury. Prosecutors maintained that the commodity nature of Bitcoin or Tether is irrelevant, citing Judge Jed Rakoff’s prior ruling that “Terraform’s crypto assets were investment contracts.” Judge Rakoff’s 2023 summary judgment in the SEC’s enforcement action against Kwon and his company resulted in a US$4.5 billion penalty and disgorgement order in April. Engelmayer, referencing this civil case outcome, again encouraged plea negotiations.
Court filings submitted by Acting US Attorney Daniel Gitner on Monday suggest that Kwon’s victims may number in the hundreds of thousands, potentially exceeding one million. Kwon faces charges including securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering.
