South Korean authorities announced today that they indicted the co-founder of Terraform Labs, the company that develops and manages the blockchain payment platform Terra. According toBloomberg, Daniel Shin and nine others linked to Terra now face multiple charges, including violations of capital markets law, which regulates the nation’s securities and financial markets.
The authorities indicted eight people, including Shin, for illegal trading; two others face breach of trust charges. Prosecutors say all the defendants were directly involved with Terra, having handled marketing, systems development and management. In addition, prosecutors have frozen 246.8 billion won ($184.7 million) in assets from the defendants. Korean officials said they’re working with the US on the case, although they didn’t go into specifics.
Billed as a stablecoin, TerraUSD isn’t backed by real-world assets or fiat currency. Instead, it’s supported by Luna, the native cryptocurrency of the Terra blockchain, that supposedly had a mechanism to restore its value to $1 if its value ever failed. In addition, investors saw it as an alluring money-making opportunity because of its Anchor lending program, which promised annual yields of 20 percent for coin deposits.
However, prosecutors allege the Terra blockchain was a “fabrication” from the get-go, with the entire system essentially built on a house of cards. They claim the blockchain’s algorithm that kept TerraUSD at a stable price was “impossible to get right.” Its value collapsed in May 2022, when depositors lost confidence in the platform and simultaneously tried to sell off their investments. At the time of publication, Terra has a value of less than two cents.
Before the collapse, the defendants took 463 billion won (nearly $346 million) in profit. In addition, prosecutors claim they illegally exposed clients’ payment details and embezzled funds. Authorities say those charged caused “astronomical damage” to global investors as the crash also played a role in the collapse of crypto hedge fund Three Arrows Capital and the broader $2 trillion decline in the cryptocurrency market.
“Shin has nothing to do with the Terra, Luna collapse as he left the [company] two years before the fallout,” said Shin’s lawyer, Kim Ki-dong, in a statement. “He voluntarily returned to South Korea immediately after the collapse, and has been faithfully cooperating with the probe for over 10 months, hoping to contribute to fact finding.”
In September, Korean authorities issued an arrest warrant for Shin’s co-founder, Do Kwon, who was also placed on an Interpol “red notice” list at South Korea’s request. He was finally arrested last month in Montenegro on capital markets law and fraud charges. The US Securities and Exchange Commission also charged Do Kwon and Terraform Labs in February.
This article originally appeared on Engadget at https://www.engadget.com/terra-blockchain-founder-daniel-shin-indicted-in-south-korea-171427921.html?src=rss
