The prosecution submitted to the court a conversation revealing that Kwon Do Hyung, the main culprit behind the Terra-Luna crash and CEO of Terraform Labs, had attempted to deceive investors from the early stages of the company’s operation, along with former Chai Corporation CEO Daniel Shin.
According to the legal circles on June 17, the Financial and Securities Crime Joint Investigation Unit of the Seoul Southern District Prosecutors Office confirmed that they submitted this opinion to the 14th Criminal Division of the Seoul Southern District Court, which is handling the first trial of Shin, on June 10. The opinion includes a conversation from May 2019 between Kwon and Shin regarding the mobile payment application Chai.
In the conversation, Kwon tells Shin in English, “We can create fake transactions that look real,” and “We can reduce (the fake transactions) as Chai grows.” When Kwon said, “I’ll make it unidentifiable,” Shin responded, “Let’s test it on a small scale and see how it goes,” to which Kwon replied, “Understood.”
Based on this conversation, the prosecution believes that the two attempted to deceive investors by manipulating Terra-related transactions from the early stages of their business. The idea was to inflate transaction volumes with fake transactions, attract investors, and then expand their business. However, Shin and others deny the allegations of fraud, arguing that the Terra-Luna crisis was caused by Kwon’s reckless management and external attacks.
The conversation records submitted by the prosecution are known to have also been submitted to the jury of the civil lawsuit in the U.S. Southern District Court of New York, which recognized Kwon’s fraudulent behavior in April, by the U.S. Securities and Exchange Commission (SEC).
The SEC filed a civil lawsuit in 2021, claiming that Kwon deceived investors and caused significant losses. Following the jury’s recognition of Kwon’s charges, they agreed with Kwon’s side to recover and pay fines totaling $4.47 billion.
Kwon left the country in April 2022, just before the Terra-Luna crash, and was arrested in Montenegro in March of the following year on charges of passport forgery. The New York prosecution has indicted Kwon on eight charges, including securities fraud, and there is ongoing competition between the U.S. and South Korea to secure his extradition.