The United States Securities and Exchange Commission (SEC) has received approval to collaborate with South Korean authorities in questioning Daniel Shin, co-founder of Terraform Labs, as part of their ongoing investigation against the company and its other co-founder, Do Kwon.
On August 16, District Judge Jed Rakoff authorized the SEC’s request, made on July 10, to interview Shin and to procure documents from Chai Corporation, another Seoul-based enterprise Shin established.
The SEC, in its July documentation, stated its intent to probe Shin regarding Kwon’s involvement in Chai, the utilization of the Terra blockchain by Chai, and the disclosures made by Chai concerning its ties to Terraform Labs. The regulatory body is also keen on understanding the reason behind Chai’s split from Terraform. Established in 2019 by both Shin and Kwon, Chai shared resources and personnel with Terraform before parting ways in 2020.
While Terraform Labs and Kwon didn’t contest the SEC’s motion, they submitted their own sets of inquiries and documentation requirements. They have also previously refuted the SEC’s accusations.
Earlier in February, the SEC filed a lawsuit against Terraform Labs and Kwon, claiming that their cryptocurrencies TerraClassicUSD (USTC) and Terra Luna Classic (LUNC), formerly known as Terra (LUNA) and TerraUSD (UST), were deceptive in nature. The SEC further contended that both Kwon and Terraform misrepresented Chai’s use of the Terra blockchain for transaction purposes. They asserted that Terraform and Kwon manipulated transactions of the Korean won-pegged stablecoin TerraKRW (KRT) to create a false narrative that Chai was an active user of the blockchain.
Terra’s extensive crypto network faced a massive downfall in May 2022, erasing approximately $40 billion in value and negatively impacting the broader cryptocurrency sector.
In subsequent developments, South Korean legal authorities slapped Shin with several fraud-related charges in April, accusing him of concealing the risks associated with investing in Terraform’s digital currencies.
Currently, Kwon is incarcerated in Montenegro for a four-month term due to his attempt to flee using a counterfeit Costa Rican passport.
In addition to the lawsuit by the SEC, Kwon is facing criminal charges in both the U.S. and South Korea, with extradition requests submitted by both nations.
