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South Korean prosecutors have unearthed new evidence suggesting that Terraform Labs co-founder Do Kwon and former Chai CEO Shin Hyun-Sung conspired to deceive investors through fake transactions.
This discovery adds another layer to the already complex case surrounding the collapse of the Terra and Luna tokens, implicating high-profile figures in the cryptocurrency space.
The fraudulent chat
According to a report by Yonhap News Agency, the Seoul Southern District Prosecutors’ Office presented new evidence to the court, revealing a chat from May 2019 between Do Kwon and Shin Hyun-Sung.
This conversation allegedly discussed the Chai payment app, which Terraform Labs used to process millions of transactions for Korean consumers.
Prosecutors argue that this chat demonstrates Kwon and Shin’s intent to manipulate Terra-related operations from the project’s inception to deceive investors.
The deception unfolds
Terraform Labs, under the leadership of Do Kwon, launched the Terra and Luna tokens, promising stability and high returns.
However, the project ultimately collapsed, causing significant financial losses for investors.
The new evidence presented by prosecutors suggests that the deception was premeditated and involved creating fake transactions to inflate the project’s credibility and attract more investors.
Denial of fraudulent intent
Despite the mounting evidence, Shin Hyun-Sung and his co-defendants deny any fraudulent intent.
They argue that the Terra and Luna crash was primarily due to Do Kwon’s mismanagement and external attacks, rather than deliberate deceit.
This defense highlights the internal conflicts and differing narratives between the key figures involved in the project.
Legal repercussions
The fallout from the Terra and Luna collapse has been extensive. Following the crash, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit accusing Do Kwon and Terraform Labs of misleading investors about Terra’s stability.
In April, a New York jury found Kwon guilty of fraud, resulting in a settlement where Terraform Labs agreed to pay $4.47 billion in disgorgement and fines.
This settlement marked a significant legal victory for regulators but did not mark the end of Kwon’s legal troubles.
Kwon’s flight and arrest
Do Kwon fled South Korea in April 2022, just before the collapse of Terra and Luna. He was arrested in Montenegro in March 2023 for passport fraud. Kwon remains detained in Montenegro, facing extradition requests and additional charges.
New York prosecutors have charged him with eight counts of securities fraud and other offenses, further complicating his legal situation.
The broader implications
The case against Do Kwon and Terraform Labs has broader implications for the cryptocurrency industry. It underscores the importance of transparency and accountability in the rapidly evolving digital asset space.
The allegations of fake transactions and investor deception highlight the risks associated with investing in unregulated markets and the potential for significant financial harm.
The role of Chai Corporation
Chai Corporation, under the leadership of Shin Hyun-Sung, played a critical role in the alleged deception.
The Chai payment app was purportedly used to create millions of fake transactions, bolstering the perceived success of the Terra project.
This connection between Chai and Terraform Labs is central to the prosecutors’ case, suggesting a coordinated effort to defraud investors.
The impact on investors
Investors in Terra and Luna have suffered substantial losses due to the project’s collapse.
The new evidence of fraudulent activity may provide some vindication but also underscores the need for better regulatory oversight and investor protection in the cryptocurrency market.
The case serves as a cautionary tale for investors, emphasizing the importance of due diligence and skepticism when evaluating investment opportunities in emerging technologies.
The future of Do Kwon and Terraform Labs
As the legal proceedings continue, the future of Do Kwon and Terraform Labs remains uncertain.
The new evidence presented by South Korean prosecutors adds to the mounting legal challenges facing Kwon. If found guilty, he could face significant prison time and financial penalties, further tarnishing his reputation and the legacy of the Terra project.
Industry reactions
The revelations about Do Kwon and Shin Hyun-Sung have sent shockwaves through the cryptocurrency industry.
Industry leaders and analysts are closely monitoring the case, which could set important precedents for regulatory actions and enforcement in the digital asset space.
The case also highlights the need for greater industry self-regulation and ethical standards to prevent similar incidents in the future.
The post New evidence reveals Do Kwon's conspiracy to deceive Terra investors appeared first on Invezz
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