Nikolas Sargeant
South Korean prosecutors present evidence suggesting Do Kwon and Daniel Shin may have planned to deceive investors from Terraform Labs' inception.
South Korean prosecutors have unveiled potentially damning evidence in the ongoing investigation into Terraform Labs.
The Seoul Southern District Prosecutors' Office submitted a written statement to Daniel Shin's trial court, revealing a May 2019 text exchange between co-founders Do Kwon and Shin that suggests early intent to mislead investors.
The conversation, centered around the "Chai" payment app, allegedly shows Kwon proposing the creation of "fake transactions that look real" to inflate the app's activity. Prosecutors claim Shin responded by suggesting to "test it on a small scale," according to local media reports.
This evidence, prosecutors argue, demonstrates an "intention to deceive investors by manipulating Terra-related transactions." They believe Terraform Labs aimed to attract investment by artificially inflating trading volume through fabricated transactions.
Shin and his legal team have denied these charges, attributing Terra and Luna's collapse to Kwon's leadership and external pressures. Notably, this conversation also played a role in the US Securities and Exchange Commission's (SEC) case against Kwon in the Southern District of New York, where a jury ruled in favor of the SEC in April 2024.
Legal Consequences and International Developments
In a related development, Terraform Labs agreed to pay $4.47 billion in penalties following the SEC's lawsuit filed in 2021. The suit accused the company and Kwon of misleading investors about Terra's stability, resulting in significant financial losses.
Kwon, who fled South Korea in April 2022 shortly before the Terra Luna crash, is currently in Montenegro after being arrested for passport forgery. He faces eight charges, including securities fraud, from US prosecutors in New York. The US and South Korea are now competing to secure his extradition.
This case continues to unfold, shedding light on the complex web of alleged fraud and deception surrounding one of the most notorious collapses in cryptocurrency history.
