Legal proceedings against Terraform Labs co-founder Do Kwon face potential influence from the pending Stablecoin TRANSPARENCY Act, known as the GENIUS Act, as it moves through the U.S. legislative process.
Federal Judge Paul Engelmayer acknowledged the relevance of the proposed stablecoin regulation to the criminal case against Kwon, suggesting it could impact the securities fraud charges specifically tied to the TerraUSD (UST) stablecoin. Kwon currently faces nine felony counts related to UST’s collapse in 2022, with a trial scheduled for January 2026.
The GENIUS Act, which aims to establish a federal framework for stablecoin oversight, has already passed the U.S. Senate and awaits consideration by the House of Representatives. Its potential enactment represents a significant shift in cryptocurrency regulation.
While the U.S. Securities and Exchange Commission’s (SEC) civil case against Terraform Labs and Kwon concluded in 2024, the criminal case remains active. The progression of the GENIUS Act underscores evolving regulatory priorities that could shape enforcement actions and legal interpretations within the crypto industry, particularly concerning alleged misrepresentations of stablecoins like UST.
The Act’s focus on defining stablecoin regulatory treatment could provide context relevant to the court’s assessment of whether statements regarding UST constituted securities fraud.