🌎 Terra Founder Do Kwon and Chai CEO Faked Transactions to Mislead Investors

South Korean prosecutors have uncovered new evidence indicating that Terra founder Do Kwon collaborated with former Chai CEO Shin Hyun-Sung to mislead investors through fake transactions.

Terraform Labs co-founder Kwon Do-Hyeong, who played a central role in the collapse of the Terra and Luna tokens, is alleged to have conspired with Shin Hyun-Sung, the former CEO of Chai Corporation, to deceive investors. This information was disclosed by the Seoul Southern District Prosecutors’ Office, revealing a May 2019 chat between Kwon and Shin concerning the Chai payment app, which processed millions of transactions for Korean consumers.

In the chat, Kwon suggested to Shin that they could “create fake transactions that look real,” and mentioned that the app’s growth could make these fake transactions “indistinguishable.” Shin agreed to this plan, suggesting they should “test it on a small scale and see what happens.”

Prosecutors argue that this conversation shows Kwon and Shin intended to manipulate Terra-related operations from the project’s inception to deceive investors. However, Shin and his co-defendants deny any fraudulent intent, attributing the Terra and Luna crash to Kwon’s mismanagement and external attacks.

Following the Terra crash, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit, accusing Kwon and Terraform Labs of misleading investors about Terra’s stability. In April, a jury in New York found Kwon guilty of fraud, leading to a settlement where Terraform Labs agreed to pay $4.47 billion in disgorgement and fines.

The Terraform Labs co-founder fled South Korea in April 2022, just before Terra and Luna collapsed. He was arrested in Montenegro in March 2023 for passport fraud and remains detained there. New York prosecutors have charged him with eight counts of securities fraud and other offenses.