Former Developer Reveals Violation of Security Laws
In a significant development, a former developer at Terraform Labs, known as “Lee,” has testified against co-founders Do Kwon and Shin Hyun-Seung in a South Korean court. Lee has accused them of deliberately violating local security laws by promoting TerraUSD (UST) as a payment option to investors despite knowing it was prohibited by regulators.
During the trial, Lee, who was involved in developing Terra’s stablecoin, provided details about the alleged misconduct within Terraform Labs.
Allegations by Prosecutors
The testimony came as part of the trial involving eight former members of Terraform Labs, including Shin. Prosecutors claim that Kwon, Shin, and the company defrauded investors by falsely presenting Terra’s USD-pegged stablecoin as a viable payment method.
Lee’s testimony strengthened the prosecution’s case, as he disclosed that he was aware of the regulatory violations associated with using UST for payments, a fact he learned from Kwon.
Co-Founder Shin Claims Innocence
Although Shin had eluded arrest, he still faces charges related to fraud and violating capital markets laws. He argues that he cut ties with Terraform Labs and Kwon in 2020, before the collapse of the Terra ecosystem. Shin also highlights the lack of regulatory clarity surrounding cryptocurrencies as a payment method during his tenure.
International Implications
In another development, former Terra CFO Han Chang-joon, a close associate of Kwon, has been extradited from Montenegro to South Korea. Han’s return will lead to further investigations by local prosecutors, demonstrating increasing legal scrutiny of Terraform Labs’ activities.
The international nature of the legal proceedings is evident as Kwon, currently held in custody in Montenegro, faces extradition either to South Korea or the U.S. His trial in the U.S. has been postponed until April to allow for the extradition process from the Montenegrin prison.
Hot Take: The Legal Battle Unfolds
The testimony of a former developer provides damning evidence against Terraform Labs’ co-founders, Do Kwon and Shin Hyun-Seung. Accused of deliberately violating security laws and defrauding investors, Kwon and Shin’s trial continues to unfold in a South Korean court. These allegations highlight the alleged disregard for legal compliance within the company. With international ramifications, the legal proceedings have extended beyond South Korea’s borders, including the extradition of a key associate from Montenegro. As the trial progresses, the future of Terraform Labs and its co-founders remains uncertain, casting doubt on the fate of the Terra ecosystem.
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