SEC Seeks to Question Terraform Labs Co-Founder Daniel Shin in Korea

SEC Seeks to Question Terraform Labs Co-Founder Daniel Shin in Korea – The SEC intends to interview Daniel Shin about the connection between Chai Corporation, Do Kwon, and Terraform Labs. With approval from a motion, the US SEC will collaborate with South Korea to question Daniel Shin, co-founder of Terraform Labs, as part of its case-building efforts against the company and its other co-founder, Do Kwon.

District Judge Jed Rakoff approved the SEC’s motion from July 10 on August 16. This motion allowed the SEC to inquire about Terra co-founder Daniel Shin and to request documents from Chai Corporation, the Seoul-based payments provider that he established. The SEC, in its July submission, expressed its interest in questioning Shin regarding Do Kwon’s responsibilities at Chai.

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 As well as the utilization of the Terra blockchain by Chai, and the extent to which Chai disclosed information about its association with Terraform. Additionally, the SEC seeks insights into the reasons behind the separation of Chai from Terraform. Chai Corporation was established by Shin and Kwon in mid-2019, and the two companies shared office space and personnel until their split in 2020.

Terraform Labs and its founder Kwon have not opposed the SEC’s motion; instead, they have put forth their own set of questions and document requests. This comes in response to the SEC’s lawsuit filed in February, where the commission accused Terraform and Kwon of fraudulent activities involving their cryptocurrencies, namely TerraClassicUSD (USTC) and Terra Luna Classic (LUNC), previously known as Terra (LUNA) and TerraUSD (UST). 

The allegations also extended to Kwon and Terraform supposedly making false claims that Chai, a platform, utilized the Terra blockchain for processing and settling transactions. The SEC further contended that Terraform and Kwon engaged in deceptive practices by fabricating transactions involving the Korean won pegged stablecoin, TerraKRW (KRT), to create an illusion that Chai was actively utilizing the blockchain technology.

In May 2022, the interlinked cryptocurrency network of Terra suffered a downfall, erasing approximately $40 billion in worth and causing a ripple effect throughout the entire cryptocurrency market. During April, Shin was accused by South Korean prosecutors of various fraud offenses, claiming that he concealed the investment risks associated with Terraform’s digital currencies.

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At the moment, Kwon is imprisoned in Montenegro for a four-month period, having attempted to exit the country using a forged Costa Rican passport. Apart from the lawsuit filed by the SEC, Kwon is also confronted with criminal allegations in the United States and South Korea. Both nations have sought his extradition.

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