Prosecutors in South Korea have requested an interview with Terraform Labs co-founder Daniel Shin over claims that he gained illegal gains using the project’s native token, LUNA.
Shin has been summoned to appear in court to address the accusations, according to Choi Sung-kook, a prosecutor of the Seoul Southern District Prosecutors’ Office, who spoke to the local media. According to investigators, Shin violates South Korean capital market law by allegedly keeping a stash of LUNA hidden from investors.
Shin made a staggering KRW140 billion ($106 million) from the sale of the tokens after failing to disclose his holdings to investors. Investigators believe that the transaction may have involved fraud and a violation of the fiduciary obligations owed to the project’s investors.
Shin will also be required to tell law enforcement officials if money from the Chai Corporation was used to advertise Terra tokens. Additionally, Shin will be questioned by the prosecution about any instances of insider trading and price manipulation at Terraform Labs.
As the South Korean government doubles down to uncover the murkiness surrounding Terra’s implosion in May, Do Kwon, CEO of the firm, has been on the run. Local authorities invalidated his passport, essentially making him a fugitive, and an Interpol ‘red notice’ flagged off an international manhunt for his capture.
Terra’s collapse set off a chain of unsavory reactions in the digital assets industry, leading to the implosions of Three Arrows Capital (3AC), Celsius, and several high-profile projects in the industry. Zooming out of the picture, investors in South Korea have had to grapple with tighter government monitoring as it strives to prevent a reoccurrence.
Not the first time Shin has been in the crosshairs
Shin severed ties with Do Kwon in 2021 to explore new frontiers, but the dark cloud from Terra has continued to haunt him. In July, his home was raided by law enforcement agents looking for evidence in relation to the Terra collapse, while the offices of digital asset exchanges Bithumb and Upbit suffered a similar fate.
South Korea’s parliament invited him to appear before them as a witness of the events leading up to the collapse. However, Shin penned a letter to the legislators saying that a parliamentary inquest would interfere with the ongoing investigations being carried out by local prosecutors.
Shin has maintained his innocence, saying he has no knowledge of any financial impropriety at Terralabs during his stint at the company. Since leaving Terralabs, Shin founded Chai, a payments technology company serving e-commerce companies in Asia.
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