Prosecutors in South Korea’s Southern District have raided the home of Terraform Labs co-founder Daniel Shin to investigate possible illegal activities.
The raid took place on Wednesday, July 20, 2022, and included payment company Shin’s Chai Corporation. Chai Corp. processes over $6 billion for over 2,200 Asian merchants. Police also raided two other businesses linked to Terraform Labs, according to a spokesperson for the prosecutor’s office.
Kwon under intense investigation
The raid on Shin’s home was preceded by the raid on seven exchanges in South Korea, namely Bithumb, Upbit, Coinone and four others, after 81 investors filed complaints in May 2022.
Five disgruntled investors claiming the blood of Kwon and Shin filed criminal complaints against the duo on May 19, 2022, followed by 76 more on May 27, citing cumulative damages of more than $6 million. The investors accused Kwon and Shin of fraud and related financial crimes. These accusations came 2-3 weeks after the collapse of the TerraUSD stablecoin due to the failure of an arbitrage mechanism designed to hold the coin at its $1 peg.
Investigators hope scrutinize material from the raids before interviewing witnesses to determine whether Kwon orchestra the collapse of TerraUSD. In June 2022, Korean prosecutors imposed a flight ban on Terraform Labs employees until investigations are complete.
Tibia Told the Financial Times of June 9, 2022, that he and Kwon had no fraudulent intent, and that they were unaware of any flaw in the algorithm that helped TerraUSD maintain its peg through a sister coin, Moon.
Prosecutors are investigating whether they can say the Anchor The protocol, a sort of crypto bank at the heart of the TerraUSD business model that offered returns of almost 20%, was a Ponzi scheme.
Last month, prosecutors also looked to find out if Shin co-founder Do Kwon evaded tax by transferring Terraform profits to an offshore account.
Where does Shin fit in?
Shin and Kwon founded Terraform Labs in 2018 to introduce new innovations in payment settlement using blockchain technology. But the duo quickly parted ways when it became apparent that South Korean regulations were lagging far behind the technology.
Shin left senior management and focused on Chai, handing over the reins of Terraform Labs to Kwon, who oversaw the launch of the Earth blockchain. Under Kwon’s watch, Terraform developed the TerraUSD/Luna ecosystem and the lending platform’s Anchor protocol, which cost investors more than $40 billion in May 2022.
Since the ecosystem implosion, Shin has distanced himself by Kwon and Terraform Labs.
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