NEW YORK, NY — A recent memo from the U.S. Department of Justice (DOJ) has generated considerable discussion regarding its effect on ongoing cryptocurrency prosecutions, particularly the case involving Do Kwon, co-founder and former CEO of Terraform Labs. The memo, circulated by U.S. Deputy Attorney General Todd Blanche, indicates a significant shift in the DOJ’s approach to crypto-related enforcement priorities. However, prosecutors have asserted that this change will not affect the charges against Kwon.
The memo, which was sent on Monday evening, outlines that the DOJ will cease pursuing prosecutions against crypto exchanges, mixing services, or offline wallets for the actions of their end users, except in certain stipulated circumstances. Critics fear this new direction may inadvertently weaken enforcement mechanisms in the rapidly evolving cryptocurrency landscape.
During a hearing held on Thursday, U.S. District Court Judge Paul Engelmayer of the Southern District of New York queried prosecutors on the potential implications of Blanche’s memo for Kwon’s case, which includes serious allegations such as commodities fraud and securities fraud, among others. The prosecution reassured the court that they have “no plans” to alter their charges against Kwon as a result of the memo.
In the courtroom, Kwon’s lead attorney, David Patton, acknowledged that while the memo might not directly alter the defense’s strategy, it could lead to pre-trial motions related to the classification of the cryptocurrencies involved. The distinction of whether these digital assets qualify as securities or commodities is at the heart of various ongoing legal debates.
The relevance of this debate is underscored by a related civil case where Kwon and Terraform Labs were found liable for fraud by another SDNY judge, who ruled that the assets in question were indeed securities. This determination further complicates the legal landscape as Kwon faces both civil and criminal charges.
Judge Engelmayer has asked both parties to keep him informed about any requests to adhere to the SEC’s rulings prior to trial. Meanwhile, the timeline for Kwon’s criminal trial has been adjusted, pushing back the start date from January 26, 2026, to February 17, 2026, to accommodate various scheduling challenges. Pre-trial motions are anticipated to be filed in July, with a status conference set for June 12 at 11 a.m. in New York.
As the legal proceedings move forward, the ongoing adjustments within the DOJ’s enforcement stance towards cryptocurrency warrant close observation, especially as it intersects with high-profile cases like that of Do Kwon.
