South Korean investigators probe Terra co-founder over illegal $100 million gain

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Daniel Shin, the co-founder of Terraform Labs, has been invited for questioning by South Korean prosecutors over allegations that he made underhand gains with LUNA, the project’s native token.

Choi Sung-kook, a prosecutor with the Seoul Southern District Prosecutors’ Office, told local media that a summons had been issued to Shin to clear the air over the allegations. Investigators say Shin breaches South Korean capital market law for allegedly holding a stash of LUNA without disclosing it to investors.

Besides failing to disclose his holdings to investors, Shin sold the tokens at a higher price, netting a staggering KRW140 billion or $106 million. Investigators opine that the transaction might amount to fraud and a breach of the fiduciary duties owed to investors in the project.

Shin will also have to provide information to law enforcement agents on whether funds from the Chai Corporation were used to promote Terra tokens. Furthermore, prosecutors will quiz Shin on his knowledge of any incidences of insider trading and price manipulation in 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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