Federal prosecutors have confirmed that the recent policy shift by the U.S. Department of Justice (DOJ) toward softer enforcement of crypto-related offenses will not impact the ongoing criminal case against Do Kwon, the co-founder of Terraform Labs.
Despite the DOJ’s new internal guidance signaling a more lenient approach to crypto innovation, particularly for exchanges and encryption-based services, prosecutors emphasized that Kwon’s case is fundamentally different.
He is facing grave charges, including securities fraud, commodities fraud, wire fraud, and conspiracy to commit money laundering, allegations centered on large-scale financial misconduct rather than routine crypto operations.
Authorities assert that the updated DOJ policy does not offer retroactive leniency to individuals already charged with serious criminal intent.
DOJ Policy Memo Encourages Civil Oversight Over Criminal Charges in Crypto
The DOJ’s updated stance, detailed in a memo signed by Deputy Secretary Todd Blanche, reflects a shift in how the U.S. government approaches the regulation of the crypto sector.
The memo advises suspending most criminal investigations into crypto exchanges and privacy-preserving services unless exceptional circumstances arise.
The goal, it states, is to prevent overreach that could hinder innovation in a rapidly evolving industry.
However, this change applies only to future enforcement decisions and focuses on delegating oversight to civil regulatory bodies such as the SEC and CFTC.
Prosecutors were quick to point out that this revised strategy does not apply to cases involving fraudulent intent, as is alleged in the case of Do Kwon and Terraform Labs.
Do Kwon’s Trial Timeline and Legal Status Remain Unchanged
Despite the DOJ’s policy pivot, the legal process against Do Kwon remains fully active. U.S. prosecutors reiterated that Kwon’s charges are based on calculated financial fraud and deception, making the DOJ’s policy memo inapplicable.
The charges could carry a maximum sentence of up to 130 years if he is found guilty on all counts.
His trial, originally scheduled for January 26, 2026, has been rescheduled to February 17, 2026, to give his defense team additional time to review extensive evidence.
The case has already moved through critical legal phases, with the next major milestone being a pre-trial conference set for June 12, 2025.
The continued momentum underscores the seriousness with which authorities are treating Kwon’s prosecution.
Also Read: Terra Founder Do Kwon’s Fate Sealed As Montenegro Confirms Extradition Agreement
DOJ’s Softer Tone Unlikely to Affect High-Profile Fraud Cases
While the DOJ’s new policy has created waves across the cryptocurrency industry by signaling reduced criminal scrutiny for some companies.
Prosecutors in the Kwon case have made it clear that those accused of major fraud will still face aggressive legal action.
The distinction lies in intent and scale, regulators may tread lightly with startups and tools promoting privacy, but fraud that allegedly impacts millions of investors will remain a top enforcement priority.
In this light, the DOJ’s evolving approach to crypto should not be misinterpreted as leniency for high-profile offenders.
Instead, it reflects a broader strategy to shift regulatory responsibility without undermining existing criminal proceedings.
Case Developments: Evidence Review Delay and Massive Victim Count
Recent developments in the case further illustrate its complexity and scope. The trial delay was primarily caused by the need for Kwon’s defense team to analyze a staggering 4 terabytes of data, underscoring the volume of evidence involved.
The case stems from the catastrophic collapse of TerraUSD (UST) and its sister token Luna in 2022, an implosion that sent shockwaves through the global crypto market.
U.S. prosecutors estimate that over one million people may have been directly impacted by the downfall of the Terra ecosystem.
As Kwon awaits trial and potential extradition, the magnitude of the alleged harm continues to place intense scrutiny on the case, which may set legal precedents for how crypto founders are held accountable in the post-crash regulatory era.
Also Read: Montenegro’s Constitutional Court Suspends Extradition Of TerraLabs Founder Do Kwon