South Korea has sued Terraform Labs co-founder Daniel Shin, along with nine others. Prosecutors have frozen about 167 million euros in assets belonging to them. The charges center on the TerraUSD stablecoin that collapsed last year.
South Korean prosecutors have charged Shin with fraud, embezzlement and dereliction of duty, writes South Korean news agency Yonhap. According to Bloomberg, there are also nine other people involved charged, including for illegal trade and breach of trust. The defendants, according to Bloomberg, had roles in marketing, system development and management at Terraform Labs.
The case revolves around the collapse of the TerraUSD stablecoin in May 2022, causing the loss of billions. According to prosecutors, Shin and the others involved collected 314 million euros in “illegal profits” before the cryptocurrency collapsed. Prosecutors have frozen 246.8 billion won from the accused. That amounts to 167.49 million euros.
A lawyer for Shin says that the co-founder ‘had nothing to do with the crash of Terra and Luna’. He allegedly left the company two years before its collapse. Do Kwon, the other co-founder of Terraform Labs, was previously sued by South Korea. He was arrested in Montenegro last month. Both the US and South Korea want Kwon to be extradited to them.
Daniel Shin and Do Kwon founded Terraform Labs in 2018. The company released its Luna cryptocurrency and also introduced a TerraUSD stablecoin, which was supposed to track the value of the dollar. The company hedged the value of TerraUSD not with the dollar itself, but with its Luna cryptocurrency. If the price of Terra fell, Luna could be bought to boost it again.
The condition for this was that the value of Luna had to remain high enough to absorb fluctuations in Terra’s value. The value of Luna fell so much last year that a further decline of Terra could no longer be captured. For a situation like this, the company had more than 80,000 bitcoin in reserve. Do Kwon invested all these bitcoins in an attempt to increase the value of the Terra, but the desired effect failed to materialise.
Both digital currencies fell significantly in value in May. They took a large part of the cryptocurrency market with them. The total market value of all cryptocurrency fell by $2 trillion after the crash.
