In the amended иске против Do Kwon, SEC alleges that the founder of Terraform Labs conducted fake transactions for the partner payments platform Chai.
According to the agency, the heads of the two companies misled investors by showing that payments were settled on the Terra blockchain. In reality, the transactions were settled ‘traditionally’, the regulator said.
As evidence, the SEC attached a screenshot of Kwon’s correspondence with Terraform co-founder Daniel Shin. Shin, who founded and led the payments platform.
“I can simply create fake transactions that look real, for which fees will be charged. We can unwind this as Chai grows,” the messages from the then-CEO of Terraform say.
Shin, in response, expressed concern that users would learn of the falsification of transactions.
“All the power lies with whoever can prove that this is fake. Therefore I will try to make this inconspicuous. I won’t tell you if you don’t do it,” — said Kwon.
Partnership between Terraform and Chai ended in 2020. Yet, the SEC contends the collaboration lasted long enough to effectively carry out the deception.
The Commission says investors bought LUNA and other tokens ‘for hundreds of millions of dollars’, believing that the corresponding Chai transactions were executed on the Terra blockchain.
In February, the SEC filed charges against Kwon for securities fraud. Among the assets cited by the agency were LUNA and the algorithmic stablecoin TerraUSD (UST).
South Korean authorities have been investigating the collapse of the Terra ecosystem, which triggered the crypto market downturn.
In September, the prosecutor’s office issued an arrest warrant for Kwon and five other Terraform employees. The former CEO was detained in Montenegro in March 2023. Subsequently, U.S. prosecutors brought criminal charges against him.
According to Korean authorities, the Terraform founder could face several prison terms in both countries.
In March, Korean authorities brought criminal charges regarding the Terra collapse and Shin. It was previously reported that Chai is also under investigation due to the service’s activity based on Terraform’s won-pegged stablecoin KRT.
In June, a court in Podgorica found Kwon guilty of document forgery in connection with his attempt to leave Montenegro.