Terra co-founder and nine employees indicted for role in crypto collapse
The crypto avalanche caused by the collapse of the Terra (not-so-stable) stablecoin last year has not yet done so retreat. The fallout has been so rocky that even former managers of the company are now caught in the public prosecutor’s grip. On Tuesday, South Korean prosecutors announced that they had indicted nine former Terra employees along with co-foundersr Daniel Shin for their alleged role in the failed crypto project.
According to a release from the Seoul Southern District Prosecutor’s Office, Shin and the other people who worked at Terraform Labs are being picked up on multiple charges, including violating the Capital Markets Act.
As Bloomberg reported, Shin’s lawyers have previously argued that the co-founder had no involvement in Terra after he left the company in 2020. The lawyers said Shin remained in South Korea to help find facts for the investigation, although previously employees have previously been subject to flight bans. However, the prosecutor’s report claimed that despite all the promises exe made about Terra blockchain’s algorithm-based crypto operation, the entire operation was impossible from the very beginning and that the staff knew it.
Terra was the stablecoin pegged to the price of the US dollar. Rather than being backed by physical assets, Terraform Labs claimed that Terra was instead algorithmically stabilized thanks to its sister crypto token called Luna. The prosecution further alleged that Terraform Labs led a fraudulent marketing campaign to deceive investors worldwide about its unworkable payment system, resulting in Terraform Labs members raking in 462.9 billion won ($345.5 million in today’s money) in profits. When the Terra/Luna ecosystem collapsed, investors lost a total of almost 60 billion dollars when crypto tokens became essentially worthless.
Terra employees now join their former boss in being charged for their time at Terraform Labs. Do Kwon, Terra co-founder and former CEO of the company that imploded the crypto market last spring, already faces extradition to both the US and South Korea after he was arrested in Montenegro last month.
In July last year Korean police raided Shin’s residence, although Kwon claimed that Shin had already walked away from the company they co-founded. Last December, a South Korean judge denied an arrest warrant for Shin, citing that he was not in danger of destroying evidence in the Terra case, or fleeing to parts unknown as his former partner Kwon had. Prosecutors said they froze $184.7 million (246.8 billion won) in the defendants’ assets. Terra employees are is prosecuted without custody.
With these impending legal battles for the former employees of Terra on the horizon, 2023 could be the year of the crypto startup. You have previously been CEO of FTX Sam Bankman-Fried headed for trial in Novemberand now Kwon and his former associates are also looking down the barrel of potential jail time time.
