Prosecutors from South Korea’s financial crimes unit have seized Shin Hyun-seong’s assets worth $105 million. Authorities allege that the Terra co-founder made unrealized gains from selling pre-issued LUNA tokens and leaking customer information before the project collapsed.
Authorities continue their efforts to bring justice to the victims of this year’s largest crash – the collapse of Terraform Labs’ LUNA/UST project. South Korean prosecutors have now seized $105 million worth of assets belonging to Terraform Labs co-founder Shin Hyun-seong who is responsible for causing investors to lose over $60 billion after his company’s crypto tokens LUNA and TerraUSD (UST) imploded in May.
The Seoul Southern District Court approved a request by prosecutors to freeze Shin Hyun-seoung’s assets. Authorities are investigating Shin on two charges – making unfair profits from selling pre-issued LUNA and UST tokens, and leaking customer transaction information from the payment app ‘Chai’ to Terraform Labs. The payments company had partnered with Terraform Labs to help crypto investors in South Korea get exposure to LUNA and UST tokens via the app. The indictment will prevent Shin from disposing of the stolen assets before being handed over to trial, and also bring prosecutors one step closer to locating the main suspect, Do Kwon. The co-founder and CEO of Terraform Labs have been reported missing since the company collapsed in May.
Prosecutors accuse Do Kwon of manipulating Terra’s price and stealing investor funds. Troubles began in January after Terraform Labs depegged UST stablecoin from the dollar and linked it to the price LUNA, which was backed by the company’s Bitcoin reserves worth $1.5 billion. As a stablecoin, UST is always supposed to maintain a 1:1 dollar ratio. When the crypto bear market came into effect in May, Bitcoin started to drop, resulting in UST falling below its $1 mark. This led to a chain of events starting with LUNA and UST losing almost all of their value and derailing three major crypto companies with exposure to the assets and ending with the wipeout of about $500 billion from the crypto market. Crypto hedge fund Three Arrows Capital (3AC), lender Celsius Network, and brokerage firm Voyager Digital were heavily involved in the highly promising crypto project which ultimately led to their demise. All three companies filed for bankruptcy in July. The implosion of LUNA/UST is said to be the largest ever in the industry.
Terraform Labs, Do Kwon and his five partners including Shin Hyun-seong are under the investigation of South Korea’s financial crimes unit for defrauding customers and the United States Securities and Exchange Commission (SEC) for conducting securities fraud. In May, Terraform Labs shut down its offices in Singapore, which is also the last known location of Do Kwon.
On September 14th, the Seoul Southern District Court issued an arrest warrant for Terra executives. The next day, Luna Foundation Guard (LFG) – a supposed non-profit established to manage and develop LUNA, created a wallet on Binance cryptocurrency exchange. LFG deposited 3,331 BTC ($52 million at the time of writing) on Binance which was then transferred to unknown wallets on KuCoin and OKX exchanges. Authorities suspect the move was made by company executives to cash out remaining assets before fleeing. Following orders, KuCoin and OKX froze the assets which are now under the custody of South Korean authorities. However, LFG and Do Kwon have denied all allegations saying that the company or its executives have not created any new wallets or moved any assets since May.
On September 17th, Singapore Police moved in to arrest Do Kwon at his residence in the city-state but could not be located. Interpol has since issued a red notice for Do Kwon while the South Korean government has suspended his passport. The Terraform Labs CEO who continues to be active on Twitter denied claims that he is hiding away from authorities.
“I am not ‘on the run’ or anything similar. For any agency that has shown interest to the community, we are in full cooperation and we don’t have anything to hide. We are in the process of defending ourselves in multiple jurisdictions and look forward to clarifying the truth over the next few months,” said Do Kwon.
The Financial and Securities Crime Investigation Team of the Seoul Southern District Prosecutors Office has ordered Shin Hyun-seong to appear before court sometime this week. Prosecution claims that Shin illegally sold pre-issued LUNA tokens without the knowledge of retail investors and made profits of more than $105 million before the company’s collapse. Attorney representing the current CEO of Chai Corporation, a payments service firm, says that even though Shin continued to invest in Terraform Labs, he left the company board in January 2020 and has not been involved in the project ever since.
“Reports that CEO Shin Hyun-seong sold LUNA at a high point and realized profits or that he made profits through other illegal methods are not true.”
In a desperate attempt to save the project, Terra community rebranded Terra and TerraUSD tokens as ‘Terra LUNA Classic’ (LUNAC) and ‘Terra Classic USD’ (USTC). Although LUNAC tokens have made some gains over the months, it is yet to reach the astronomical levels attained by its predecessor while USTC is still struggling to get to the $1 constant. Culprits of one of the largest rug-pull events in the history of crypto are still on the run as they face lawsuits from investors who lost money and investigations from international authorities.