South Korea sues TerraUSD stablecoin co-founder for fraud

By admin On Apr 25, 2023

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South Korea has indicted Terraform Labs co-founder Daniel Shin, along with nine others. Prosecutors have frozen about 167 million euros in assets belonging to them. The charges revolve around 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 too nine other people involved have been charged, including because of illegal trade and breach of trust. The defendants had roles in marketing, systems development and management at Terraform Labs, according to Bloomberg.

The case revolves around the collapse of the TerraUSD stablecoin in May 2022, causing billions to be lost. According to prosecutors, Shin and the others involved made 314 million euros in ‘illegal profits’ before the cryptocurrency collapsed. Prosecutors have frozen 246.8 billion won from those charged. That amounts to 167.49 million euros.

A lawyer for Shin says the co-founder “had nothing to do with the crash of Terra and Luna.” He is said to have left the company two years before its collapse. Do Kwon, the other co-founder of Terraform Labs, was previously charged by South Korea. He was arrested in Montenegro last month. Both the US and South Korea want Kwon 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 backed the value of TerraUSD not with the dollar itself, but with its Luna cryptocurrency. If Terra’s price fell, Luna could be bought to boost it up again.

The condition for this was that the value of Luna had to remain high enough to absorb fluctuations in the value of Terra. The value of Luna fell to such an extent last year that a further decline in Terra could no longer be absorbed. 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 did not materialize.

Both digital coins 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 two trillion dollars after the crash.