South Korean officials have charged Daniel Shin, one of the co-founders of Terraform Labs, and nine other people with a number of things, including breaking the law on capital markets with the failed Terra/Luna project.
Shin and Do Kwon started the company that made the LUNA and UST digital coins.
On Tuesday, it was announced that ten people, including Shin, had been charged by the Seoul Southern District Prosecutors’ Office. It is said that these ten people, who were involved with Terraform Labs, made at least 462.9 billion won ($346.2 million) by selling their coins before the crash, which caused “astronomical damage” to investors.
The prosecutors called Terra a “fictitious” project and said that 184.6 million dollars worth of assets from the ten people who were charged had been frozen.
Some of the money is in the digital asset bank Sygnum Bank AG in Switzerland. There may be more money in other places, and the lawyers are working to find it.
A person familiar with the situation told The Wall Street Journal that Sygnum Bank followed all relevant court decisions about Terraform Labs and is not aware of any regulatory actions against it.
Shin was charged with illegal trading, more specifically with fraud and breaking laws and rules about electronic financial transactions and donations in the capital markets.
Shin is being charged with the same things as seven other people who are said to have worked directly with Terra in areas like management, marketing, and system development.
Two more people who were not directly involved with Terra have been charged with breaking trust and illegally taking bribes because they supposedly did favors for the company in exchange for LUNA.
The story of Do Kwon is also hard to understand. Last month, he was found and arrested in Montenegro. He is being held there on charges of forgery linked to what are thought to be fake passports.
Both South Korea and the US want to send Kwon back to their country.
As was recently stated, Do Kwon’s legal team went after the United States Securities and Exchange Commission (SEC), saying that Terra coins are not securities, that the SEC’s charges against Terraform, Kwon, and other executives are false, and that the SEC has no power over Terraform.
They asked that the charges against them be dropped.
Shin’s lawyers told The Wall Street Journal on Tuesday that their client left Terraform Labs in 2020 and wasn’t involved in the big Terra/Luna crash of 2022 because of that.
Shin also made Chai, a payment app in South Korea that used the Terra blockchain to handle payments. But lawyer Kim Ki-dong said that the two companies stopped working together when Shin and Kwon left.
He also said that Shin had been helping investigators with this case for a long time.
Shin had nothing to do with the Terra Luna crash because he left the company two years before it happened. He went back to South Korea on his own right after the collapse and had been working with the investigation for over ten months, trying to help find the truth, Kim said in a statement that was quoted by Bloomberg.
They also said the following:
Terraform Labs convinced investors that the Chai app was using Terra to make payments, which increased demand for the coin. To do this, the team illegally transferred the payment records of Chai users without their permission and copied Chai transaction records onto its blockchain to make it look like Terra was being used to make Chai payments.
Shin’s lawyers said that investors were told about a payment system that ended when Shin and Kwon stopped working together.
According to this method, Chai used users’ payments to buy TerraKRW, which was tied to the South Korean won, and invest in it. They said that they used the money they made to help users.
Kim also said that Shin left Terraform Labs before the Anchor Protocol and the Mirror Protocol were started, so Shin wasn’t involved in those projects.
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