The investigators seek to determine whether Kwon orchestrated the collapse of the stablecoin TerraUSD, so they placed a flight ban on Terraform Labs employees. Shin left the reins of Terraform Labs to Kwon alone, who oversaw its launch, but it lost over USD 40 billion to investors.
Terraform Labs co-founder Daniel Shin is under investigation for possible illegal activities related to the collapse of TerraUSD (UST). That situation led prosecutors from the Southern District of South Korea to raid his house.
The raid included the payment company Shin’s Chai Corporation, which processes over USD 6 billion for more than 2,200 merchants. A spokesperson for the prosecution said that the police also broke into two other companies linked to Terraform Labs.
Kwon Is Also under Close Investigation for the Collapse of TerraUSD
The raid on seven cryptocurrency exchanges in South Korea preceded the one on the house of Shin. The police broke into Bithumb, Upbit, Coinone, and four others after 81 investors filed complaints in May.
On May 19th, five disgruntled investors filed criminal lawsuits against Do Kwon and Daniel Shin. Another 76 did the same on May 27th, citing cumulative damages over USD 6 million. The alleged victims accused them of fraud and related financial crimes. That occurred from 2 to 3 weeks after the TerraUSD stablecoin collapsed due to an arbitrage failure causing it to lose its USD 1 level.
The investigators plan to examine the material and question witnesses to determine whether Kwon orchestrated the collapse of TerraUSD. In June, Korean prosecutors placed a flight ban on Terraform Labs employees until they completed the investigation.
According to the Financial Times, Shin said that he and Kwon had no fraudulent intentions. He stated that they were unaware of the flaws in the algorithm helping TerraUSD maintain its peg through Terra (LUNA).
Prosecutors want to find out whether Anchor Protocol, a kind of crypto bank for the TerraUSD business model, was a Ponzi scheme.
In June, prosecutors also said that Do Kwon, the co-founder of Shin, transferred the profits of Terraform to an offshore account.
The Relationship of Daniel Shin with This Entire Situation
Shin and Kwon founded Terraform Labs in 2018 to introduce innovations in payment settlement through blockchain technology. However, they soon parted ways when they realized that South Korean regulations on technology were far behind.
Shin left the board and focused on Chai, leaving the reins of Terraform Labs to Kwon alone, who oversaw its launch. Under his supervision, the firm developed the TerraUSD/Luna ecosystem and the Anchor lending platform protocol. Unfortunately, it has lost more than USD 40 billion to investors since May 2022.
After the implosion suffered by the ecosystem, Shin has remained distant from Kwon and Terraform Labs.
Meanwhile, LUNA is trading at around USD 1.90 and has accumulated a 2.7% gain over the last 24 hours. Its daily trading volume is USD 31.18 million, while its market capitalization is USD 252.05 million, according to CoinGecko.
By Alexander Salazar
