Co-Founders Under Fire: Ex-Terra Developer’s Testimony Adds Weight to Prosecution

The testimony of a former developer at Terraform Labs pointed out the deliberate securities law violation by co-founders Do Kwon and Shin Hyun-Seung.

Former Developer’s Testimony

In a significant turn of events, a former Terraform Labs developer, identified as “Lee,” testified against Do Kwon and Shin Hyun-Seung in a South Korean court. According to local media outlet Chosun, Lee accused the co-founders of consciously violating local security laws by promoting TerraUSD (UST) as a potential payment option to investors despite being aware of regulatory prohibitions.

Lee, a former core developer responsible for the technology behind Terra’s stablecoin, made these allegations during a trial at the Seoul Southern District Court. While Lee’s full identity remains undisclosed due to privacy laws, his testimony shed light on the alleged misconduct within Terraform Labs.

Prosecutors’ Allegations

The testimony came amidst the ongoing trial of eight former members of Terraform Labs, including Shin. Prosecutors had accused Kwon, Shin, and the company of defrauding investors by falsely representing Terra’s USD-pegged stablecoin as a viable payment method, among other charges. 

Lee testified that he was aware of the regulatory violations associated with using UST for payments, stating that he had heard about it through Kwon. This admission strengthens the prosecution’s case against the co-founders and underscores the alleged disregard for legal compliance within Terraform Labs.

Co-Founder Shin Claims Non-Involvement

While Shin had previously escaped arrest warrants, he continues to face charges related to fraud and violating capital markets laws. However, he maintains that he severed ties with Terraform Labs and Kwon in 2020, well before the collapse of the Terra ecosystem. 

Shin further pointed out that his tenure in the company was also affected by the lack of regulatory clarity surrounding the use of cryptocurrencies as a payment method.

International Ramifications

In a separate development, former Terra CFO Han Chang-joon, a close associate of Kwon, was extradited from Montenegro to South Korea. Han’s arrival in Seoul will prompt further investigation by local prosecutors, signaling intensified legal scrutiny of Terraform Labs’ activities.

The extradition process highlights the international dimensions of the legal proceedings against Terraform Labs. The legal ramifications for Terraform Labs and its co-founders have spread beyond the South Korean borders, as Kwon, who remains in custody in Montenegro, faces extradition to either South Korea or the U.S. His trial in the U.S. has been postponed to April to accommodate the extradition process from the Montenegrin prison.  

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.