Federal prosecutors made it clear on Thursday that the U.S. Department of Justice’s recent shift in crypto enforcement policy will not affect the ongoing criminal case against Do Kwon, the embattled co-founder of Terraform Labs. The clarification came during a court appearance in New York, where the prosecution emphasized that all charges against Kwon remain active and unchanged.
The update follows a memo issued earlier this week by Deputy Attorney General Todd Blanche, announcing that the DOJ will no longer pursue criminal charges against crypto exchanges, wallet providers, or mixing services based solely on the actions of their users. The guidance also instructs prosecutors to avoid charging violations of securities or commodities laws in digital asset cases unless there is a clear and alternative criminal statute available.
However, prosecutors handling Kwon’s case asserted that the DOJ’s internal realignment has no bearing on his prosecution, which centers on direct allegations of fraud—including securities fraud, wire fraud, and conspiracy—linked to the collapse of TerraUSD and the broader Terraform ecosystem.
Prosecutors Affirm Continuation of Kwon’s Case
During Thursday’s hearing in the Southern District of New York, U.S. District Judge Paul Engelmayer raised a key question: would the DOJ’s recent memo impact the federal case against Do Kwon?
Prosecutors responded firmly, stating they have “no plans” to amend or drop the current charges. Kwon is facing nine criminal counts in total, including securities and commodities fraud, wire fraud, and conspiracy to defraud.
That said, the DOJ memo’s implications were not dismissed entirely. David Patton, Kwon’s lead attorney and a partner at Hecker Fink LLP, noted that while the guidance may not directly apply, it could influence the defense’s pre-trial strategy. Specifically, Patton hinted at the potential relevance of whether the Terra ecosystem’s tokens qualify as securities or commodities—a distinction that remains at the heart of several high-stakes regulatory disputes.
“I do think it could potentially be the subject of some pre-trial motions,” Patton told the court.
“It may or may not be directly related to the memo.”
SEC Ruling Looms Over Kwon’s Criminal Case
As the criminal proceedings continue, a parallel civil ruling by the U.S. Securities and Exchange Commission may cast a long shadow over the trial. In that case, a federal judge previously ruled that the tokens tied to Terraform Labs were, in fact, securities—potentially setting a precedent for the criminal classification of those same assets.
During Thursday’s hearing, Judge Engelmayer instructed both parties to inform the court ahead of time if they intend to cite that SEC ruling during trial. Doing so could significantly influence how legal arguments unfold, especially around whether certain digital assets fall under the scope of securities law.
Meanwhile, the start of Kwon’s trial has been delayed slightly due to scheduling conflicts. Originally slated for January 26, 2026, the proceedings are now set to begin on February 17, 2026.
Quick Facts
- The DOJ’s recent memo signals a shift in crypto enforcement but does not affect Do Kwon’s prosecution.
- Kwon faces multiple criminal charges, including securities and commodities fraud, wire fraud, and conspiracy.
- The DOJ has disbanded its National Cryptocurrency Enforcement Team, marking a strategic pivot in enforcement priorities.
- Kwon’s trial has been postponed to February 17, 2026, due to scheduling conflicts.
