South Korean prosecutors on Tuesday filed multiple charges against 10 people, including a cofounder of Terraform Labs, which created the algorithmic stablecoin TerraUSD and its sister cryptocurrency, Luna, that collapsed last year and cost investors tens of billions of dollars.
The charges against Daniel Shin, 38, who founded Terraform Labs with Do Kwon in 2018, included fraud, breach of duty, and embezzlement, according to the South Korean Yonhap News Agency.
Nine other people with links to TerraUSD, across marketing, systems development, and management, also were charged, according to Bloomberg. Prosecutors froze 246.8 billion won, or about $184 million, in assets from those who were charged.
Terraform Labs’ TerraUSD cryptocurrency was an algorithmic stablecoin pegged one-to-one with the U.S. dollar that relied on computer code and its non-dollar-pegged sister cryptocurrency, Luna, to maintain value. Last May, the digital currencies faced a crypto bank run that collapsed the price of both, leading to an 11-figure loss that directly affected retail investors, according to a complaint by the Securities and Exchange Commission. The SEC sued Terraform Labs and Kwon, the former CEO, for securities fraud in February.
In a press conference announcing the charges against Shin and others on Tuesday, South Korean officials called their project a “fabrication” from the beginning, and accused the people involved of taking 463 billion won, or more than $344 million, in illegal profits before Terra collapsed, according to Bloomberg.
South Korean prosecutors have been trying to persuade the courts to approve an arrest warrant for Shin since November. Authorities raided his home in July. Shin, who left the company in 2020 prior to TerraUSD’s collapse, told the Financial Times last June that in creating TerraUSD there was “no intention of deception.”
“Shin has nothing to do with the TerraUSD, Luna collapse as he left the comnpany [sic] two years before the fallout,” Shin’s lawyer, Kim Ki-dong, said in a statement to Bloomberg. “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.”
Kwon was arrested in Montenegro last month after being stopped at the airport with falsified documents. Sought by both South Korean and U.S. authorities for his role in the collapse of TerraUSD, Kwon was charged with forgery by Montenegrin prosecutors, according to a local news outlet in Montenegro, which could delay his extradition to either South Korea or the U.S. Prosecutors in New York last month charged Kwon with eight counts, including securities fraud, commodities fraud, and wire fraud.
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