Something besides FTX: how’s Terraform doing?
While the world is digesting the FTX collapse, South Korean law enforcement continues to investigate the Terraform Labs. The prosecutor’s office decided to freeze Daniel Shin’s assets of more than $100 million.
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The decision to recover and secure 140 billion won (about $104 million) was made by the Seoul Southern District Court. According to law enforcement, the funds belonging to Shin Hyun Sung (also known as Daniel Shin) are illegal profits.
The Joint Financial Crime and Securities Crime Investigation Team believes that Terraform Labs co-founder and close friend Do Kwon received a large amount in the LUNA Token Presale. At the same time, ordinary investors were not sufficiently informed about the cryptocurrency.
The decision to recover and secure 140 billion won (about $104 million) was made by the Seoul Southern District Court. According to law enforcement, the funds belonging to Shin Hyun Sung (also known as Daniel Shin) are illegal profits.
The Joint Financial Crime and Securities Crime Investigation Team believes that Terraform Labs co-founder and close friend Do Kwon received a large amount in the LUNA Token Presale. At the same time, ordinary investors were not sufficiently informed about the cryptocurrency.
“This is a problem with pre-mining. The fact is that there was no proper information disclosure when tokens were issued,” said Hwang Sook Jin, speaker of the National Assembly of South Korea on cryptocurrency policy. He is sure that the losses are inevitable for investors who believe “that a thousand tokens have been issued, but there are actually 10,000 of them.”
However, this is not the only accusation Daniel Shin received from prosecutors. He is also suspected of duty dereliction and transferring users’ transaction data from his company Chai Corporation to Terraform Labs.
In response to the court decision, Shin's lawyer is expected to plead not guilty:
“Reports that CEO Shin Hyun Sung sold Luna in the heat and made a profit, or that he made a profit through other illegal methods, are false.”
The game of hide and seek with Do Kwon continues
The co-founder and CEO of Terraform Labs reacted to the new round of investigation in the traditional way – with a series of Twitter posts. Do Kwon once again sympathized with investors who lost money even with the transparent and open source system, and also expressed the hope that “others will succeed in this mission in which we have failed.”
But, of course, it was not the work of a lifetime story that was the main reason for publications. Do Kwon decided to share the results of an independent technical audit of Terraform Labs and Luna Foundation Guard (LFG), conducted by the audit company JS Held. The experts were tasked to assess the actions of these organizations to protect the price of TerraUSD (UST) during the period of 8-12 May 2022.
JS Held specialists were given access to raw data, online wallets and CEX trading accounts. Additionally, it was emphasized that the amount of compensation received by the firm wouldn’t influence the audit results.
During the JS Held procedure, it was necessary to confirm or refute the main allegations against Terraform Labs and LFG, namely:
- whether the organization's funds have been misappropriated or stolen;
- whether the funds were used in the interests of insiders;
- whether LFG has funds other than officially claimed wallets;
- whether LFG funds have been frozen.
After receiving the audit report, Do Kwon decided to make it public in an attempt to protect Terraform Labs.
Although I was wrong (and horribly wrong), I claim that there was no fraud. TFL has donated over $3 billion to the Luna Foundation Guard (LFG) to diversify UST's collateral backing and focused our investments to grow Terra’s ecosystem. We wouldn't have done this if we thought UST were to fail.
Source: Twitter
The results of an independent audit suggest that the hate rays towards companies still need to be pacified:
- LFG spent about $2.8 billion (80,081 BTC and $49.8 million in stablecoins) defending the UST peg, in line with LFG tweets on May 16, 2022;
- Terraform Labs went above and beyond and spent $613 million of its own capital to defend the UST peg. According to the report, all of the LFG funds were spent to defend parity of the UST dollar peg as declared and the remaining LFG funds are indeed the only remaining funds;
- LFG funds have not been frozen and continue to be stored in their own wallets since May 16, 2022.
Source: Twitter
Convincing the public that “we fought to the last to protect UST and its users,” Do Kwon did not skip on the collapsed FTX:
Terra was not a centralized platform gone bust through misuse of funds or fraud — it was one of the largest layer 1 blockchains, with two native assets in the CoinMarketCap Top 10 ranking.
Source: Twitter
Interestingly, Do Kwon, who blames fate for the Terraform Labs disaster, has not been located by South Korean law enforcement agencies or Interpol for more than two months.
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