The US Securities and Exchange Commission (SEC) has been granted the authority to collaborate with South Korea in its pursuit of investigating Terraform Labs co-founder Daniel Shin and pursuing legal action against the company and its co-founder Do Kwon.
District Judge Jed Rakoff approved the SEC's request on August 16, enabling the SEC to seek assistance from South Korea in questioning Daniel Shin and obtaining relevant documents from Chai Corporation, a payments provider founded by Shin in Seoul.
The SEC's interest in questioning Shin revolves around probing Do Kwon's involvement with Chai, the utilization of the Terra blockchain by Chai, and the disclosed relationship between Chai and Terraform. Furthermore, the SEC aims to understand the rationale behind the separation of Chai from Terra form. Chai, established by Shin and Kwon in 2019, shared resources and premises with Terraform until their independent spin-off in 2020.
The SEC had previously indicated Terraform and Kwon in February, accusing them of fraudulent practices related to their cryptocurrencies TerraClassicUSD (USTC) and Terra Luna Classic (LUNC), which were previously known as Terra (LUNA) and TerraUSD (UST). The commission also allegations that Kwon and Terraform falsely promoted Chai's usage of the Terra blockchain for processing and settling transactions. These allegations come in the wake of Terra's crypto ecosystem experiencing a significant collapse in May 2022, resulting in substantial losses in value for both Terra and the broader cryptocurrency market.
Earlier in April, South Korean prosecutors had charged Shin with multiple counts of fraud, alleging that he had concealed the risks associated with investing in the Terraform cryptocurrency. Meanwhile, Kwon is serving a prison sentence in Montenegro for attempting to leave the country using a forged Costa Rican passport. Apart from the SEC lawsuit, Kwon also faces criminal charges in both the United States and South Korea, with both countries seeking his extradition.
