The Seoul Southern District Prosecutors’ Office has indicted Shin Hyun-seong, co-founder of Terraform Labs, and nine other individuals for their role in the collapse of the Terra stablecoin ecosystem. The 10 individuals were charged with fraud, breach of trust, and embezzlement after 11 months of investigation, with suspected illicit profits of nearly $350 million.
Shin is accused of misleading investors and falsely advertising the product despite knowing that the project was unfeasible, leading to significant losses. The indictment comes just days after a Seoul district court ruled that the Luna token was not a security and did not fall under the purview of the Capital Markets Act. The court had earlier refused the prosecution’s ten demands of charging Shin for violating security law.
Prosecutors have seized assets worth a total of $180 million from the indicted individuals. This includes assets belonging to Shin, who co-founded Terraform Labs, one of the budding crypto ecosystems that popularized the concept of algorithmic stablecoins. The collapse of the native stablecoin, TerraClassicUSD (USTC), de-pegged from its dollar value in May 2022, and the $40 billion ecosystem came crashing down.
The indictment of Shin and nine other executives comes just a month after former CEO Do Kwon was arrested in Montenegro. Prosecutors in Montenegro indicted Kwon on charges of document forgery, and he is also facing multiple charges of security fraud from the United States Securities and Exchange Commission.
Terra was a prominent crypto ecosystem that offered algorithmic stablecoins, which gained immense popularity. The Terra stablecoin ecosystem’s collapse has raised concerns about the credibility and reliability of stablecoins in the crypto market. Stablecoins are widely used in the cryptocurrency market to hedge against market volatility, and their reliability and stability are crucial for investors.
The indictment of Shin and his associates highlights the need for stricter regulations in the crypto market to prevent fraudulent activities and ensure investor protection. The Korean government has been taking significant steps to regulate the crypto market, with the latest being the amendment of the Act on Reporting and Use of Specific Financial Information to strengthen anti-money laundering regulations in the cryptocurrency sector.