It has been authorised for the U.S. Securities and Exchange Commission (SEC) to work with South Korea on its investigation of Terraform Labs and its co-founders, Daniel Shin and Do Kwon. The SEC is now able to interview Shin and get access to Chai Corporation’s records thanks to this ruling, which District Judge Jed Rakoff approved on August 16.
Chai was co-founded by Shin and Kwon in 2019 and initially collaborated closely with Terraform. The businesses had diverged by 2020. The use of the Terra blockchain by Chai and its relationship statements with Terraform are the main subjects of the SEC’s investigation. The causes of Chai’s breakup with Terraform are also being investigated.
Terraform Labs and Kwon did not object to the SEC’s motion, but they did provide their own inquiries and earlier debunked the SEC’s assertions. There have been accusations that they misrepresented Chai’s use of the Terra blockchain for transactions.
The Terra cryptocurrency ecosystem suffered a huge $40 billion loss in May 2022, which sent the value of its token, LUNA, down to zero and set off a general market crash. The LUNA token then divided into the LUNA and the LUNA Classic (LUNC) tokens. Since then, South Korean authorities have accused Shin of fraud for allegedly concealing the dangers of buying Terraform’s cryptocurrency.
The U.S. Securities and Exchange Commission (SEC) sued Terraform Labs, based in Singapore, and its CEO Do Hyeong Kwon on February 16, 2023, with running a multibillion dollar cryptocurrency fraud from April 2018 until May 2022. The Terra USD (UST) stablecoin was one of many unregistered crypto asset securities that were used in the fraud, along with “mAssets” and other digital assets. According to the SEC, Kwon and Terraform misrepresented the stability and use of these assets while also promised investors large returns. These tokens’ worth fell precipitously in May 2022. In the cryptocurrency industry, the SEC emphasises the value of openness and compliance with securities regulations.
Kwon has been sentenced to a three-month jail term in Montenegro for attempting to leave the country using a fraudulent Costa Rican passport. Beyond the SEC’s complaint, he is also under investigation in South Korea and the United States.