Terraform Labs co-founder Shin Hyun-seung and seven other associates are set to face trial on May 26 over fraud charges related to the collapse of the Terra-Luna stablecoin and crypto project in May 2022.
Despite the gravity of the situation, Shin seems to be taking his defense seriously, assembling a team of 30 lawyers, including 11 from a law firm that recently hired a former Seoul prosecutor who investigated the Terra-Luna collapse, according to reports.
On April 25, local prosecutors indicted Shin and nine other suspects, though none have been apprehended. Shin and seven Terraform staffers are accused of fraud, while two others face allegations of bribery linked to the case. A court date for the bribery charges has not been scheduled yet.
In 2018, Shin founded Terraform Labs with Do Kwon, who is currently in custody in Montenegro for supposedly traveling with forged travel documents.
Shin, a 38-year-old entrepreneur and University of Pennsylvania’s Wharton School alumnus, had previously established Tmon Inc., a South Korean e-commerce firm that generated $100 million in 2021.
Shin hails from a well-connected family that includes his grandfather, Shin Jik-soo, a former Korean justice minister, and his uncle, Hong Seok-hyun, the chair of JoongAng Holdings, one of the country’s most prominent media groups.
Prosecutors’ allegations against Shin and the Terra project
Prosecutors have accused Shin of marketing the Terra stablecoin as a conceivable payment option, well aware that such facilities were illegal, and duping investors. Nonetheless, Shin’s lawyers have refuted the claims, contending that financial authorities did not have a fixed position on cryptocurrency as a viable payment method at the time of Terra’s introduction.
Seoul Southern District Prosecutors’ Office financial crime unit head, Dan Sung-han, asserted in an April 25 press conference that Shin’s role in the alleged financial swindle was more significant than that of Terraform chief Kwon. However, prosecutors failed to persuade the local court to issue an arrest warrant for Shin despite two attempts.
Earlier this year, prosecutors made a renewed attempt to catch Do Kwon, the co-founder of Terraform Labs, whom they had been unable to apprehend previously. They characterized the entire Terra project at a press conference as a “hoax.”
The legal fallout from the Terra debacle has now spread to several countries. Do Kwon and Terraform Labs CFO Han Chang Joon were detained in Montenegro last month. The United States and South Korea are seeking Kwon’s extradition, but he and Joon must first answer charges of using forged passports in the country where they were apprehended.
Kwon is seeking to have the charges filed against him by the US Securities and Exchange Commission (SEC) dismissed, arguing that the tokens associated with Terra do not meet the definition of securities.
His argument gained momentum when a South Korean court ruled that Terra Classic (LUNC), the rebranded version of LUNA, is not a security.
