A South Korean court recently rejected a prosecutor’s request to issue an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong, also known as Daniel Shin. The request followed the recent arrest of Terra co-founder Do Kwon. On March 23, Kwon was arrested at Podgorica airport in Montenegro while attempting to use fake documents to fly abroad. Taking advantage of the situation, the Seoul Southern District Prosecutors Office requested an arrest warrant for Shin on March 27, citing his involvement in cashing in illicit profits from Terra (LUNA) and TerraUSD (UST) sales.
However, the court denied the request citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence. Shin currently faces fraud charges, specifically in relation to allegedly hiding risks associated with investing in Terraform Labs’ in-house tokens.
Following Kwon’s arrest in Montenegro, authorities from both the United States and South Korea have tried to extradite the entrepreneur. Montenegrin Justice Minister Marko Kovač said the U.S. made diplomatic efforts to ask for Kwon to be handed over, while South Korean officials have requested extradition.
When a country receives several extradition requests, they consider several factors like the severity of the committed criminal offense, the location and time when the criminal offense has been committed, the order in which they received the request for extradition, and other factors.
Terraform Labs is a blockchain protocol that uses fiat-pegged stablecoins on its blockchain to facilitate cross-border payments. The tokens run natively on the blockchain to ensure they carry a more passive monetary policy compared to reward-based tokens.
Earlier this year, Terraform Labs raised $150 million in a funding round, co-led by PolyChain Capital and Coinbase Ventures. The company plans to invest the funds in expanding its decentralized applications (dApps) ecosystem and Terra’s adoption in various sectors.
Terraform Labs’ main stablecoin, UST, has gained popularity in South Korea due to the country’s strict regulations on stablecoin issuance. The UST’s popularity led to the Korean government assessing a new tax policy for stablecoin issuances. The South Korean government is now studying staking services used by crypto exchanges to assess whether they fall under the current capital gains tax regulations.
According to Yonhap, Shin is accused of earning illegal profit in Terraform Lab’s token offering by concealing the token’s high volatility and the possibility of losing money. Shin has also been accused of manipulating coin prices, siphoning off part of the sales proceeds, and committing document forgery.
In response to the allegations, Shin has stated that he did not conceal any risks, and the company always made disclosures according to regulatory requirements. Additionally, he denied any wrongdoing regarding document forgery and illicit sales profit. Shin’s lawyers have stated that the prosecutors’ request for an arrest warrant is based on unfounded allegations and that they will actively defend their client.
The Terra blockchain has gained traction in Asia and is used by Pundi X, which operates point-of-sale systems that enable retailers to accept payments in cryptocurrencies. Furthermore, Terra has partnered with various other companies to expand its ecosystem, including major Korean e-commerce company Wemakeprice, which joined Terra’s alliance program to provide discounts to consumers on the Terra network.
In conclusion, the rejected request for an arrest warrant for Shin marks another development in the ongoing Terraform Labs saga. The decision by the South Korean court to deny the request may enable Shin to seek a more comprehensive legal defense, making it more challenging for prosecutors to push forward their case against him. It remains unclear how this controversy will impact Terraform Labs’ overall business operations, but it’s worth mentioning that the company has raised significant funds and has partnerships with various established businesses in Asia.
