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SEC Collaborates with South Korea in Probing Terraform Labs and Do Kwon

by Blockchain NewsAugust 19, 2023

The U.S. Securities and Exchange Commission (SEC) has secured approval to collaborate with South Korea in its probe against Terraform Labs and its co-founders, Daniel Shin and Do Kwon. This decision, sanctioned by District Judge Jed Rakoff on August 16, allows the SEC to question Shin and access documents from Chai Corporation, a Seoul-based payments provider he founded.

Shin and Kwon co-founded Chai in 2019, initially operating closely with Terraform. By 2020, the companies had diverged. The SEC’s investigation focuses on Chai’s use of the Terra blockchain and its relationship statements with Terraform. The reasons behind Chai’s separation from Terraform are also under scrutiny.

While Terraform Labs and Kwon didn’t oppose the SEC’s motion, they presented their own queries and have previously refuted the SEC’s claims. Accusations suggest that they falsely stated Chai’s use of the Terra blockchain for transactions.

In May 2022, the Terra cryptocurrency ecosystem experienced a staggering $40 billion loss, causing its token, LUNA, to plummet nearly to zero and triggering a broader market crash. Subsequently, the LUNA token split into two distinct entities: LUNA and LUNA Classic (LUNC). South Korean prosecutors have since charged Shin with fraud, accusing him of hiding the risks associated with investing in Terraform’s cryptocurrency.

On February 16, 2023, the U.S. Securities and Exchange Commission (SEC) charged Singapore-based Terraform Labs and its CEO, Do Hyeong Kwon, with conducting a multi-billion dollar crypto fraud from April 2018 to May 2022. The scheme involved various unregistered crypto asset securities, including “mAssets” and the Terra USD (UST) stablecoin. The SEC alleges that Terraform and Kwon falsely marketed these assets, promising high returns and misleading investors about their stability and usage. In May 2022, the value of these tokens crashed. The SEC emphasizes the importance of transparency and adherence to securities laws in the crypto sector.

Kwon is currently jailed in Montenegro for trying to exit using a fake Costa Rican passport, resulting in a three-month sentence. He faces investigations in both the U.S. and South Korea, beyond the SEC’s complaint.

Image source: Shutterstock

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Terraform Labs CEO Asks for Dismissal of SEC Charges

by Blockchain NewsApril 25, 2023

In a recent motion filed to dismiss the charges leveled against him by the Securities and Exchange Commission (SEC), Do Kwon, co-founder and CEO of Terraform Labs, argued that the claims are invalid and that the SEC lacked proper jurisdiction to bring charges against him and his company. Kwon’s counsel stated that the tokens and projects developed by Terra were “aimed at the world” and did not specifically target U.S. investors, making the SEC’s claims invalid.

The SEC had previously claimed that tokens including MIR, LUNA (LUNA), and UST are securities, but Kwon pushed back against this argument in his motion to dismiss the charges. The South Korean district court recently dismissed security violation charges against the co-founder of Terraform Labs, Hyun-seong Shin, deeming LUNA as a non-security under Korea’s Capital Markets Act. This ruling makes Kwon’s motion right only in connection to LUNA.

However, recent developments suggest that Kwon’s legal troubles may not be over. In a press conference after the Seoul Southern District Prosecutor’s office indicted 10 people involved in the collapse of the Terra stablecoin ecosystem, the prosecutor reportedly identified Signum as the Swiss bank account where Kwon transferred more than 10,000 Bitcoin (BTC) from the Terra platform and the Luna Foundation Guard to a cold wallet, which was then converted to fiat.

The Financial and Securities Crime Joint Investigation Unit of the Seoul Southern District Prosecutor’s office is reportedly monitoring Bitcoin owned by Luna Foundation Guard and has determined that the transferred amount, which aligns with the SEC complaint, is approximately $100 million (equivalent to 130 billion won). The prosecutors clarified that the $100 million was not kept solely in the Signum account and was dispersed in various locations. It was verified that a portion of the funds was transferred to the Kim & Chang law firm account to cover legal fees, while the rest amounted to billions of won.

Kwon’s legal troubles began when the SEC filed charges against him and his company, which preempted his arrest in Montenegro, where he currently faces extradition. South Korean authorities had issued an arrest warrant for Kwon in September, and U.S. federal prosecutors unveiled criminal charges against him shortly after he was arrested a month ago.

In conclusion, while Do Kwon has requested the dismissal of SEC charges against him, recent developments suggest that his legal troubles may not be over yet. It remains to be seen how this situation will develop and how it will affect the future of Terraform Labs.

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Tagged : Do Kwon / JURISDICTION / News / SEC / TERRAFORM LABS / Tokens

Terraform Labs co-founder defends against SEC allegations

by Blockchain NewsApril 23, 2023

Do Kwon, co-founder of blockchain company Terraform Labs, has defended himself against allegations of fraud brought by the US Securities and Exchange Commission (SEC). Kwon’s lawyers requested the dismissal of the lawsuit, arguing that the SEC’s allegations were unfounded and that US law prohibited regulators from asserting jurisdiction over the digital assets in question.

According to a Bloomberg report, Kwon’s lawyers stated that “US law prohibits the SEC from using federal securities law to assert jurisdiction over the digital assets in this case.” They also claimed that the SEC failed to prove that Kwon had defrauded US investors in connection with the collapse of Terra’s stablecoin, UST.

Kwon’s legal troubles began in March 2022 when he was arrested at Podgorica airport in Montenegro while allegedly attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested Kwon’s extradition. As of now, it remains unclear which country, if any, will be granted their extradition request.

Montenegrin Justice Minister Marko Kovač recently commented on the matter, stating that “determining to which state they will be extradited is based on several factors like the severity of the committed criminal offense, the location and time when the criminal offense has been committed, the order in which we have received the request for extradition and several other factors.”

In addition to defending himself against the SEC’s allegations, Kwon’s lawyers also argued that the UST stablecoin is a currency, not a security. This claim is significant, as US securities law only applies to securities, not currencies.

The collapse of Terra’s UST stablecoin has been a point of controversy for some time. The stablecoin was designed to maintain a stable value of $1, but its value plummeted to $0.85 in late 2021. The collapse reportedly cost investors $40 billion.

While Kwon fights against the SEC’s allegations, another Terraform Labs co-founder, Shin Hyun-Seong, has managed to avoid legal trouble. The Seoul Southern District Court recently denied an arrest warrant for Shin, citing the unconfirmed nature of the allegations and the unlikeliness of Shin being a flight risk or destroying evidence.

In conclusion, the legal proceedings against Do Kwon and Terraform Labs are ongoing, and it remains to be seen how the case will be resolved. However, Kwon’s lawyers’ defense against the SEC’s allegations suggests that there may be significant legal challenges ahead for the regulatory agency.

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Tagged : Do Kwon / News / SEC LAWSUIT / Stablecoin / TERRAFORM LABS / Unregistered Securities

Terra co-founder indicted for forging legal documents

by Blockchain NewsApril 22, 2023

Prosecutors in Montenegro have issued indictments to Do Kwon, the former co-founder and CEO of Terraform Labs, for allegedly forging legal documents. Kwon was arrested on March 23 while attempting to board a private plane at an airport in Podgorica, the capital of Montenegro. According to reports, he was using fake documents while attempting to board a flight to Dubai. Following Kwon’s arrest, Han Chang-jun, Terraform’s former chief financial officer, was also arrested in Podgorica and is facing similar charges.

The Prosecutor’s Office of the State of Podgorica has now indicted Kwon for his alleged involvement in the forgery of legal documents. The Korean industry-focused news agency Block Media reported on April 20 that the Montenegro prosecutors had requested an extension of the detention period for the two former Terraform executives after issuing the indictments.

Meanwhile, Shin Hyun-seung, another co-founder of Terraform, also known as Daniel Shin, is still walking free in South Korea. Local authorities have attempted to arrest Shin, but the Seoul Southern District Court denied the request. After questioning Shin, the court stated that there was little likelihood that he would flee or destroy any evidence related to the fall of Terra.

The news of Kwon’s indictment comes amid global prosecutors reaching major milestones in procedures involving some cryptocurrency executives. On April 20, the Turkish police detained Faruk Fatih Ozer, founder and former CEO of Thodex, who allegedly fled Turkey with $2 billion stolen from the exchange in 2021.

Terraform Labs is a blockchain-based platform that enables the creation of stablecoins pegged to fiat currencies. The company was founded in 2018 by Do Kwon, Daniel Shin, and Ryan John King. The platform’s native token, LUNA, has seen significant growth in recent months, reaching an all-time high of $22.41 on April 4, 2021. Terraform Labs has raised over $25 million in funding to date and has partnerships with several major companies, including Binance and Huobi.

However, the company has faced significant challenges in recent months. In February 2021, the price of LUNA plummeted after the company’s Mirror Protocol was hit by a flash loan attack, resulting in a loss of $370,000. The company has also faced criticism over the high fees associated with using its platform.

Terraform Labs has been actively working to address these issues and has announced several new initiatives in recent weeks. The company is reportedly working on a new stablecoin pegged to the South Korean won, and is also exploring the use of non-fungible tokens (NFTs) on its platform. Despite the challenges, Terraform Labs remains a major player in the cryptocurrency industry and is likely to continue to drive innovation and growth in the sector.

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Tagged : Arrest / Do Kwon / Indictment / LEGAL DOCUMENTS / News / Terra

Terraform Labs CEO Sent $7 Billion to Law Firm Before Ecosystem Collapse

by Blockchain NewsApril 16, 2023

South Korean prosecutors have confirmed that Terraform Labs CEO Do Kwon sent $7 billion to Kim & Chang, a top South Korean law firm, just before the collapse of the Terra ecosystem. The prosecutors believe that Kwon’s decision to send the funds was a deliberate move that allegedly reaffirmed his awareness of the impending collapse and anticipated legal problems. The law firm’s lawyers also visited Montenegro to meet with Kwon and Terraform’s former CFO, Han Chang-joon.

Kwon was previously arrested at Podgorica airport in Montenegro after trying to fly to Dubai using fake documents. Both United States and South Korean authorities have sought Kwon’s extradition, but the court has yet to decide. On April 7, South Korean prosecutors suspected Kwon of converting illicit funds from Terra (LUNA) to Bitcoin (BTC) and requested Binance to halt all withdrawal requests linked to Kwon.

In total, prosecutors identified $314.2 million in illicit assets associated with Terraform Labs co-founder Kwon and his associates, out of which about $69 million is reportedly directly linked to Kwon. The information regarding Kwon’s transfer of $7 billion to the law firm is expected to help in the ongoing fraud case against him and his associates.

The allegations against Kwon and his associates highlight the risks associated with cryptocurrency investments and the importance of transparency and accountability in the management of cryptocurrency projects. The case also highlights the role of law enforcement agencies in investigating and prosecuting financial crimes in the cryptocurrency industry.

The outcome of the ongoing fraud case against Kwon and his associates will have significant implications for the cryptocurrency industry, particularly in South Korea, where regulatory authorities have been cracking down on illegal activities in the sector. It remains to be seen how the case will unfold and what impact it will have on the future of Terraform Labs and the broader cryptocurrency ecosystem.

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Tagged : Do Kwon / FRAUD CASE / KIM & CHANG / News / SOUTH KOREAN PROSECUTORS / TERRAFORM LABS

South Korean prosecutors trace millions in illicit funds tied to Terra co-founder

by Blockchain NewsApril 7, 2023

South Korean prosecutors are actively tracing illicit funds linked to Terraform Labs co-founder Do Kwon and his associates. A recent investigation identified 414.5 billion won ($314.2 million) in illegal assets, with approximately 91.4 billion won ($69 million) of that amount directly linked to Kwon. Despite the large sum of money tied to Kwon, the South Korean authorities are unable to recover any of the assets due to Kwon’s reported conversion of the funds into Bitcoin using overseas exchanges.

According to a report published by KBS, a local media outlet, Kwon converted most of the illicit funds into Bitcoin instead of investing in physical assets. This has made it difficult for the South Korean authorities to recover the assets since they are not under their jurisdiction. The investigation into Terra’s collapse by the United States Securities and Exchange Commission (SEC) revealed that Kwon siphoned nearly $100 million worth of Bitcoin from Terra after the collapse.

Further reports based on an SEC interview with former Terraform Labs revealed that Kwon was accused of siphoning $80 million a month before the collapse of the Terra ecosystem. This has led South Korean prosecutors to actively trace properties associated with Terraform Labs executives to recover some of the illicit funds from the Terra debacle.

In their pursuit of justice, South Korean prosecutors have seized homes and other assets to stop former Terra employees from selling assets that might be tied to legal cases. Among the assets seized are residences in Seoul owned by former CEO Shin Hyun-seong and others. The prosecutors also filed foreclosure actions against foreign-registered vehicles, lands in Hwaseong and Gapyeong in Gyeonggi-do, and Taean in South Chungcheong Province.

Terra was a booming crypto ecosystem until its $40 billion collapse in May 2022 due to fraud, with Kwon at the epicenter. Initially thought to be a market-triggered event, the investigation revealed that Terraform Labs had dumped over $450 million of UST on the open market in the three weeks leading up to the depeg of the TerraUSD (UST) stablecoin. Four days after the last sale, UST started collapsing. Despite an arrest warrant from South Korean authorities and an Interpol red notice against his name, Kwon evaded arrest for nearly a year before being caught on March 23 in Montenegro.

In conclusion, the South Korean authorities are actively pursuing justice in the Terra debacle by tracing illicit funds and recovering assets tied to Terraform Labs executives. The investigation revealed the scale of the fraud committed by Do Kwon and Terraform Labs, leading to the collapse of the crypto ecosystem. Although most of the illicit funds have been converted into Bitcoin, the authorities remain vigilant in their efforts to recover the assets and bring those responsible to justice.

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Tagged : Bitcoin / Collapse / Do Kwon / ILLICIT FUNDS / News / TERRAFORM LABS

Terraform Labs Co-Founder Do Kwon Appeals Extended Detention

by Blockchain NewsMarch 26, 2023

Do Kwon, the co-founder of Terraform Labs, was recently arrested at Podgorica airport in Montenegro for attempting to fly to Dubai using fake documents. Following his arrest, the Montenegrin court approved a 30-day extension to Kwon’s detention period, which is longer than the usual 72-hour period allotted by authorities.

Kwon’s legal representative has confirmed that they will be appealing the court’s decision to extend his detention time. The decision was made due to the high possibility of Kwon attempting to escape, as he is a foreign national whose identity was not clearly identified.

This is not the first time that Kwon has been suspected of moving between countries. Since the collapse of the Terra ecosystem, South Korean authorities have been investigating Kwon’s movements between Singapore, Dubai, and Serbia. On March 23, just a few hours after Kwon’s arrest in Montenegro, United States prosecutors in New York charged the entrepreneur with fraud.

Terraform Labs is a blockchain company that focuses on building decentralized financial infrastructure. The company’s native cryptocurrency, LUNA, has experienced significant growth in the past year, with a market capitalization of over $12 billion. Kwon’s arrest has raised concerns about the impact on the company and the cryptocurrency market as a whole.

The arrest has also shed light on the issue of using fake documents to travel. This is not the first time that a high-profile individual has been caught using fake documents, and it highlights the need for stricter regulations and checks at airports. Kwon’s case also underscores the importance of verifying the identity of individuals, particularly foreign nationals, to prevent potential security threats.

As Kwon’s case unfolds, it remains to be seen how it will impact the cryptocurrency market and Terraform Labs as a company. The company has not yet released an official statement regarding Kwon’s arrest and charges. However, the situation will likely have significant implications for the company and its stakeholders. It also highlights the need for increased scrutiny and due diligence in the cryptocurrency industry, as it continues to grow and evolve.

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Tagged : DETENTION / Do Kwon / FAKE DOCUMENTS / MONTENEGRO / News / TERRAFORM LABS

Singapore authorities investigate Terraform Labs

by Blockchain NewsMarch 6, 2023

Since Do Kwon and Terraform Labs were accused of engaging in fraudulent activity by the United States Securities and Exchange Commission (SEC) a month ago, the authorities in Singapore have begun an investigation into the firm that Kwon helped build, Terraform Labs. According to the allegations made in the action brought by the SEC, Kwon stole about 10,000 bitcoin from the Terra platform and the Luna Foundation Guard, which he then turned into fiat currency. The Securities and Exchange Commission (SEC) asserts that Kwon has cleaned more than one hundred million dollars’ worth of bitcoins since the original collapse of the site.

An email issued by the Singaporean police on March 6 said that “investigations have began in respect to Terraform Laboratories,” as stated in a report by Bloomberg. In addition, the email said that the investigations are “ongoing,” and that Kwon is not in the city-state at the present time.

Several participants in the cryptocurrency industry have voiced their disapproval of the case on the grounds that it might pave the way for the SEC to target stablecoins in future litigation. The comparisons of assets made by the SEC have even been described as “wild” by lawyers working in the business.

The beginning of this whole affair can be traced back to May 2022, when the stablecoin known as Terra USD (UST) was unpegged from the US dollar. The following demise of the Terra ecosystem was responsible for a huge implosion in the market for digital assets, which resulted in losses of approximately $40 billion.

Authorities in South Korea have also conducted an investigation into Terraform Laboratories, and a warrant has been issued for Kwon’s arrest in that country. In an attempt to identify Kwon, South Korean law enforcement officers headed to Serbia. On February 15, South Korean prosecutors filed a warrant to arrest a local e-commerce executive who they accused of taking Terra (LUNA) in exchange for promoting Terra Labs. The executive was suspected of receiving the payment for marketing Terra Labs.

As at the time this article was written, Kwon has not made any comments. During the whole of the incident, the co-founder of Terraform Labs has been quite active on social media. On the other hand, it is the beginning of February and he has not tweeted since then.

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Tagged : Do Kwon / Fraud / News / PROBE / Singapore / TERRAFORM LABS

Seoul Prosecutors Reveal Terra’s Do Kwon is Hiding in Europe

by Blockchain NewsNovember 5, 2022

The exact location of Do Kwon, the founder, and CEO of the failed stablecoin company Terraform Labs, currently remains a mystery. However, South Korean prosecutors have identified that the wanted crypto fugitive may be in Europe, according to Bloomberg’s report on Friday.

The prosecutor’s office said Do Kwon is currently residing in Europe as his location has been partially discovered. The law enforcement agents said Kwon recently moved to a third country located in Europe—via Dubai.

After the mess regarding the infamous TerraUSD’s collapse, Kwon fled South Korea and moved to Singapore in September. On September 17, South Korean prosecutors unearthed more details about Kwon’s movement, saying that the crypto developer had left Singapore and flown to Dubai likely as a stopover to destinations unknown. Now they are more certain that Kwon’s current residence is in Europe, as law enforcement continues digging for his precise location.

Besides efforts to trace Kwon’s location, the South Korean prosecutor’s office on Friday said they have obtained evidence indicating that Kwon had once ordered an employee to manipulate the price of Luna Classic (LUNC).

Price Manipulation Evidence

The prosecution office said they have obtained a “conversation history” in which “CEO Kwon specifically ordered price manipulation.”

During the last bull market, the price action of Terra’s LUNC, formerly Terra (LUNA), was undoubtedly one of the cryptocurrencies with the best performance.

According to data from crypto price and information data platform CoinGecko, LUNA surged in value by over 2,800% from $4.18 in late May 2021 to its all-time high of $119.18 on April 5 2022, before its dramatic collapse on April 30.

In early September, the Seoul Southern District Prosecutors’ Office issued an arrest warrant for Kwon and five others on charges of violating the country’s financial laws. The prosecutors issued various charges against Kwon and others including fraud and tax evasion. Kwon was believed to be in Singapore at that time as police said he was no longer in South Korea.

Later that month, Interpol issued a “red notice” for the search and arrest of Kwon. The move came after South Korean authorities had requested assistance from the global police agency to trace Kwon’s whereabouts earlier that month.

Kwon and his firm faced investigations by South Korea’s government after the value of his cryptocurrencies, Luna and TerraUSD, plummeted and contributed to a $300 billion crash across the crypto economy in May. The plunge caused massive losses among investors and led to calls for an inquiry into Kwon and his firm after allegations of fraud and tax evasion.

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Tagged : Do Kwon / Europe / News / SOUTH KOREAN PROSECUTORS

Terra’s Do Kwon Says He is Cooperating With Prosecutors in New Interview

by Blockchain NewsOctober 18, 2022

In what appears to be the longest interview session Do Kwon has had since the collapse of Terraform Labs and its associated tokens LUNA and UST, founder, Do Kwon, has granted over an hour of an interview to crypto Journalist and host of the Unchained Podcast Laura Shin.

In the interview, Kwon said he is currently cooperating with South Korean regulators but has not felt the need to turn himself in as he has not seen an arrest warrant from the prosecutors yet.

“We haven’t seen a copy of the arrest warrant so every piece of data we are consuming is from the media,” Kwon said, affirming that all of the document requests he has been served has been treated.

One of the most important talking points with Shin was the remorse he felt for the whole collapse of the protocol. He emphatically said he was “sorry” about how everything went down and said he believes every investor in the LUNA and UST believed his assertions that the algorithmic stablecoin can be kept stable.

Kwon said he believes the accusations of fraud and scams are unwarranted and that every investor deserves to know what really transpired. He said he understands that it is very difficult to leave with immense losses and that is part of what breaks him the most.

The embattled developer said besides the collapse of the LUNA and UST tokens and the ecosystem that was built around the coins, he has contributed positively to the growth of the crypto ecosystem in the five years he has been a leader in the space.

Despite the more than an hour interview, Kwon did not disclose his location, and besides South Korean prosecutors that are on the hunt for him, Interpol has also issued a Red Notice for him, making him one of the most wanted humans alive.

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Tagged : Do Kwon / Industry Expert / Interpol / Terra / Ust