- Former Terraform Labs employee Lee alleges co-founders misled investors about TerraUSD, despite knowing of local payment prohibitions.
- South Korea’s prosecutors indict Kwon, Shin, and Terraform Labs for fraudulently promoting TerraUSD as a viable payment method.
In the latest news of the Terraform Labs scandal, a former developer has come forward with serious allegations against the company’s executives. During a court hearing, this former employee, identified only as Lee due to South Korea’s privacy laws, testified that Terraform Labs’ co-founders, Kwon Do-hyeong and Shin Hyun-seung, misled investors about the capabilities and legal status of their stablecoin, TerraUSD.
Lee’s testimony revealed that despite being aware of local regulations prohibiting the use of TerraUSD as a payment method, the co-founders promoted it as such to investors. This statement surfaced during the third trial of eight former Terraform Labs members, including Shin, as reported by the local media Chosun Ilbo.
The case becomes more intricate as it unfolds
Shin defended his position, claiming that the regulatory stance on the use of cryptocurrencies as payment methods was not clearly defined at that time. He also stated that he had left Terraform Labs two years prior to the cryptocurrency project’s collapse in 2022, distancing himself from the ensuing chaos.
Prosecutors in South Korea have indicted Kwon, Shin, and Terraform Labs for defrauding investors by falsely promoting the dollar-pegged stablecoin as a viable payment method, among other charges. These allegations follow the catastrophic collapse of the Terra-Luna project in 2022, which had a profound impact on the cryptocurrency market.
In an unexpected twist to the ongoing narrative, Han Chang-joon, the former CFO of Terra and a key associate of Kwon, was extradited from Montenegro to South Korea. According to Aju Business Daily, a local news outlet, Han is expected to arrive in Seoul and subsequently be interrogated by local prosecutors.
Han and Kwon were arrested last year at an airport in Montenegro for attempting to travel with forged documents. While Kwon remains in custody in Montenegro, local authorities are still deliberating his extradition to either South Korea or the United States.
These recent events in the Terraform Labs case underscore the complexities and legal challenges in the cryptocurrency industry. The ongoing testimonies and legal proceedings paint a picture of a sector struggling for regulatory clarity, investor protection, and accountability from cryptocurrency project founders.
