On February 5, reports emerged from the Korean daily newspaper Chosun, detailing how a former Terra development team leader had come forward with testimony challenging Terra founder Do Kwon.

According to the newspaper, the 14th Criminal Division of the Seoul Southern District Court examined its inaugural witness yesterday in the legal proceedings involving Do Kwon.

The witness, known only as “Lee,” testified against Do Kwon as well as Terraform Labs co-founder Shin Hyun-seung.

Lee’s Testimony on Terra’s Co-Founders

During his testimony, Lee admitted to being informed about the legal difficulties confronting Terra. He attributed his awareness of regulatory obstacles to discussions with Do Kwon.

Lee also underscored the operational structure of Terra, emphasizing its goal to establish LUNA as a functional currency through the “ChaiPay” payment system. The outlined model indicated potential profits, depending on the anticipated rise in the value of the LUNA token.

Shin’s defense team contested Lee’s testimony, challenging the notion that Kwon and Shin were aware of the impracticality of Terra payments and seeking to point out discrepancies between Lee’s assertions and the presented facts.

Shin, along with members of the Terra team, Do Kwon, and others, are facing accusations of unlawfully promoting the project from July 2018 to May 2022, with the alleged objective of securing profits through deceptive practices. Currently, eight individuals affiliated with Terra, including Shin, are being investigated for potential violations of South Korea’s Capital Markets Act.

The Collapse of Do Kwon’s TerraUSD and LUNA

Terraform Labs was the parent company overseeing the stablecoin TerraUSD and the cryptocurrency LUNA. In May 2022, both TerraUSD and LUNA collapsed, resulting in an almost $45 billion reduction in market capitalization within a week. The fallout also contributed to losses totaling hundreds of billions of dollars in the broader crypto market.

Terraform Labs has initiated bankruptcy protection proceedings in order to pursue a critical appeal against the U.S. Securities and Exchange Commission, following a U.S. court’s ruling that both Terraform Labs and Do Kwon violated U.S. laws by not registering two cryptocurrencies—LUNA and MIR—which the SEC classified as securities. As a result, Do Kwon has been charged in the U.S. with a multibillion-dollar fraud.

According to Reuters, Han Chang-joon, a former financial executive at Terraform Labs, was extradited to South Korea yesterday, after having been detained in Montenegro since March 2023.

Han Chang-joon, the former Chief Financial Officer of #TerraformLabs has been extradited to South Korea by Montenegrin Police after the completion of his jail term.

— Cryptonews.com (@cryptonews) February 5, 2024

“Today, the state of Montenegro acted on the request of South Korea, and according to the decision of the Ministry of Justice, handed over Han Chang Joon to the competent authorities of his home country,” Montenegro’s justice ministry statement said.

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