- DOJ’s recent memo narrowing crypto enforcement priorities will not impact Do Kwon‘s prosecution, prosecutors confirmed in court.
- Kwon’s defense attorney suggested the memo could potentially influence pre-trial motions, particularly regarding whether cryptocurrencies in the case are securities.
- Due to scheduling challenges, Kwon’s criminal trial has been postponed to February 17, 2026, three weeks later than originally planned.
Federal prosecutors confirmed Thursday that the U.S. Department of Justice’s recent decision to dismantle its crypto unit and narrow enforcement priorities will not affect the criminal case against Terraform Labs co-founder Do Kwon. The statement came during a hearing in the Southern District of New York, where Judge Paul Engelmayer specifically asked whether the DOJ memo would impact charges against Kwon, which include securities fraud, commodities fraud, and conspiracy.
The DOJ memo, issued Monday evening by Deputy Attorney General Todd Blanche, instructed staff to stop pursuing criminal charges against crypto exchanges, mixing services, and offline wallets for the actions of their end users. The directive also generally restricts prosecutors from filing charges that would require the department to argue whether digital assets qualify as securities or commodities when alternative criminal charges are available.
“We have no plans to change our charges against Kwon at this time,” prosecutors told Judge Engelmayer during Thursday’s hearing. However, David Patton, Kwon’s lead attorney and partner at Hecker Fink LLP, indicated that the memo could potentially affect pre-trial motions. “I do think it could potentially be the subject of some pre-trial motions,” Patton said. “It may or may not be directly related to the memo.” He specifically noted that questions about whether cryptocurrencies involved in the case qualified as securities could be relevant.
Previous SEC Case Findings
In a separate civil case brought by the Securities and Exchange Commission against Kwon and Terraform Labs last year, another judge in the Southern District of New York determined that the tokens involved were indeed securities. Kwon and his company were found liable for fraud in that case.
Judge Engelmayer instructed both parties to inform him well in advance of the trial if they plan to request that he adhere to any rulings or findings from the SEC case. This could have significant implications for how the criminal trial proceeds, especially given the DOJ memo’s guidance on securities classifications.
Trial Date Pushed Back
The hearing also revealed scheduling challenges that will delay Kwon’s trial. Originally set for January 26, 2026, the criminal proceedings have now been postponed to February 17, 2026. The next batch of pre-trial motions are expected to be filed in July, with a third status conference scheduled for June 12 at 11 a.m. in New York.
The case stems from the 2022 collapse of Terraform Labs’ stablecoin TerraUSD and its sister token Luna, which wiped out approximately $40 billion in market value and triggered a broader crypto market crash. Kwon faces a total of nine criminal charges, including wire fraud and conspiracy to defraud, in addition to the securities and commodities fraud charges.
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