- The Securities and Exchange Commission charged TerraForm Labs with fraud.
- TerraForm Labs defense attorneys claim Do Kwon cannot attend the U.S. court.
- Do Kwon is serving a 4-month sentence for document forgery in Montenegro.
TerraForm Labs founder Do Kwon has admitted to artificially inducing trading volume on Terraโs blockchain. This was revealed in a leaked chat being used as evidence in the lawsuit initiated by the U.S. Securities and Exchange Commission (SEC).
The leaked documents reveal a conversation between the co-founding pair Do Kwon and Daniel Shin. This comes as the SEC continues to escalate the investor defrauding case, which includes criminal charges for capital market law breach and manipulation of cryptocurrency prices.
Sponsored
The conversation between the co-workers was recorded on Slack in September 2019. In the transcript, Do Kwon utters โI can make fake transactions that just look real.โ After sensing that Shin is holding back on the suggestion, Kwon adds: โWe can wind that down as Chai grows.โ
Shin then asks: โWouldnโt people find out itโs fake?โ to which the notorious Terra Luna founder responds: โAll the power to those that can prove itโs fake. Because I will try my best to make it indiscernible. I wonโt tell if you wonโt,โ followed by a wink emoji.
A Partnership Gone Terra-bly Wrong
TerraForm Labs’ blockchain company partnered with Chai Corporation to accelerate the average payment speed, but the SEC alleges that TerraForm Labs never actually replaced Chaiโs pay mechanism with Terraโs blockchain.
According to the SECโs allegations, the Chai payment appโs transaction system was used for transactions that were labeled as โblockchainโ to the public, putting fake records on the Terra blockchain scanner.
Both crypto moguls are blamed for having manipulated $UST stablecoin, which was shredded to pieces in May 2022, along with the original $LUNA token.ย
As Do Kwon is currently serving four months of prison time in Montenegro for forging multiple identification documents, Terraโs defense team is fighting against his extradition to the United States, attempting to legally block the SECโs request for deposition.
On the Flipside
- The newly-appointed TerraForm Labs CEO Chris Amani defended the leaked chat messages as โnot damning.โ
- Chris Amani argues that similar practices are being done with โinflationary staking rewardsโ to this day.
- Amani proclaims: โTerra relied only on fees so they needed some other way to do it.”
Why This Matters
The SECโs crackdown on crypto comes after a market-wide domino effect caused by the Terra Luna fiasco in 2022. The case is crucial in order to bring closure to the crypto investors affected by the 2022 financial crisis.
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