South Korean prosecutors have submitted evidence suggesting Terraform Labs co-founder Do Kwon and former Chai CEO Hyun-seong Shin may have planned to deceive investors from the outset.
The Seoul Southern District Prosecutors’ Office presented a written statement to Shin’s trial court alleging a May 2019 text exchange between Kwon and Shin regarding the “Chai” payment app.
Prosecutors claim the conversation reveals Kwon proposing the creation of “fake transactions that look real” to inflate the app’s activity. Shin reportedly responded with a suggestion to “test it on a small scale,” locla media outlet reported.
According to the prosecutors, the text exchange between Kwon and Shin demonstrates an “intention to deceive investors by manipulating Terra-related transactions.” They believe the company aimed to attract investment by artificially inflating trading volume through fabricated transactions.
Shin and his representatives have denied the charges, attributing the collapse of Terra and Luna to Kwon’s leadership and external pressures. Notably, this conversation also formed part of the US Securities and Exchange Commission’s (SEC) case against Kwon in the Southern District of New York. The US jury found in favor of the SEC in April, acknowledging Kwon’s fraudulent activities.
The SEC’s lawsuit, filed in 2021, accused Terraform Labs and its co-founder of misleading investors regarding Terra’s stability, leading to significant financial losses. Following the jury verdict, a $4.47 billion settlement was reached, requiring Kwon to pay a hefty fine and reimburse investors (approximately 6.1 trillion won).
Kwon, who fled South Korea in April 2022, shortly before the Terra Luna crash, remains in Montenegro after facing arrest for
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