On Friday, the judge heard arguments as to whether or not Daniel Shin, co-founder of Terraform Labs, should be jailed for allegedly making unlawful profits in the run-up to the Terra ecosystem’s demise.
According to the Korea Times, Shin is suspected of selling a $105 million stash of Terra’s LUNA tokens at the top price of the cryptocurrency, despite the fact that these tokens had been pre-issued without informing normal investors. Prosecutors contend that Terra’s LUNA cryptocurrency is a financial investment security, and the court will rule on whether or not to approve Shin’s detention on Friday or Saturday.
Though Shin claimed to have sold the majority of his LUNA holdings before the price spike, he insisted that he still retained a substantial amount at the time of the fall.
The warrant names Shin as well as seven other early investors and engineers from Terraform Labs. One of the accused reportedly works for Kernel Labs, a company founded by ex-Terra developers, as reported by the local JTBC news channel.
Do Kwon, CEO and co-founder of Terraform Labs, was given an arrest order by South Korean police in September, and he has since claimed that he is “not on the run” despite being the subject of an Interpol red alert. In October, his passport was revoked by South Korean authorities.
Another complaint has been filed against Terra co-founder Do Kwon, this one for $57 million in class action damages, which was filed at the end of October.
In May of 2022, the Terra ecosystem collapsed, causing an estimated $40 billion in investments to be lost in a matter of weeks. The collapse sent shockwaves through the crypto market, with the price of Bitcoin and other cryptocurrencies plunging, and ultimately contributing to the bankruptcies of crypto lenders including Celsius, Voyager and BlockFi, and hedge fund Three Arrows Capital.
Blockchain analytics firms such Nansen and Glassnode have also indicated that the collapse of Terra led to the downfall of now-bankrupt crypto exchange FTX, as crypto contagion swept throughout the industry.
