SEC Gets a Nod to Probe Daniel Shin in Korea
The United States Securities and Exchange Commission (SEC) steps up its investigation by obtaining permission to question Terraform Labs’ co-founder, Daniel Shin, in South Korea.
Background of the SEC Motion
In a July 10 motion, the SEC sought permission to interrogate Shin regarding Do Kwon’s relationship with Chai Corporation and Terraform Labs. On Aug. 16, this request was granted by District Judge Jed Rakoff, enabling the SEC to dig deeper into Shin’s operations with Chai Corporation.
SEC’s Allegations: Terra, Chai, and Beyond
The primary motive behind the SEC’s motion revolves around probing into Kwon’s role in Chai, the utilization of the Terra blockchain by Chai, and the transparency of Chai concerning its ties with Terraform. The commission is particularly interested in uncovering the reasons behind Chai’s split from Terraform in 2020.
The Stance of Terraform and Kwon
While Terraform Labs and Kwon did not challenge the SEC’s motion, they have consistently denied any allegations put forward by the SEC.
Fraud Allegations on Cryptocurrencies
The SEC’s lawsuit against Terraform and Kwon stems from accusations that the cryptocurrencies TerraClassicUSD and Terra Luna Classic were deceptive. Additionally, they alleged that there was a false representation regarding Chai’s utilization of the Terra blockchain.
Impact on the Crypto Market
The disintegration of Terra’s crypto infrastructure in May 2022 led to a massive decline in the crypto market’s value, approximately a whopping $40 billion.
Legal Troubles for the Co-Founders
The allegations don’t end with the SEC. In April, South Korean authorities charged Shin with several counts of fraud, asserting that he concealed the risks associated with investing in Terraform’s digital currencies. Meanwhile, Kwon finds himself incarcerated in Montenegro after a botched escape attempt using a counterfeit Costa Rican passport. Both the U.S. and South Korea are pushing for his extradition, escalating the legal challenges for the Terraform co-founders.
