Terra (LUNA): Co-Founder and 9 Others Indicted for Capital Markets Violations
South Korean prosecutors have filed charges against Shin Hyun-Seung, one of the co-founders of Terraform Labs (also known as Daniel Shin), and nine others for violating capital markets regulations.
The charges were made after an investigation into the collapse of the Terra ecosystem last year. This collapse led to the loss of tens of billions of investor wealth.
The Seoul Southern District Prosecutors’ Office stated that Terra was a “fictitious” project and that its algorithmic stablecoin, TerraUSD, was not feasible from the outset.
In May last year, two related Terra tokens – LUNA and TerraUSD (known as UST) – collapsed. Unlike normal asset-backed stablecoins, UST was backed by Luna, which had its price set by the market.
The Prosecutors’ Office said that the algorithm used to keep UST at a stable price was impossible to implement correctly.
The prosecutors have claimed that the 10 individuals charged caused “astronomical damage” to investors and made a profit of 463 billion won ($347 million). The Korean authorities have frozen 247 billion won in assets so far as part of a restitution request to compensate victims.
Daniel Shin’s assets have also been frozen. The frozen assets are not part of a forfeiture request to put the money into the national treasury but instead part of a restitution request to compensate victims.
The indictment comes one day after the Seoul Southern District Court ruled that Terra Classic (LUNC) is not a security under Korea’s Capital Markets Act. However, the prosecutors have called for the Supreme Court of Korea to make a ruling on this matter.