A former development team leader at Terraform Labs has provided critical testimony in a South Korean court, alleging that co-founders Do Kwon and Shin Hyun-seung knowingly promoted TerraUSD (UST) as a payment option despite being aware of its legal impossibility. The witness, identified as “Mr. Lee,” shared his insights during the trial of the two co-founders facing legal scrutiny in the aftermath of Terraform Labs’ collapse in May 2022.
Terraform Labs, founded in 2018 by Do Kwon and Shin Hyun-seung, gained prominence with the launch of its native token, LUNA, in 2019. In 2020, the company introduced TerraUSD (UST), an algorithmic stablecoin that plays a pivotal role in the Terra ecosystem. However, the company’s success was short-lived as it faced a series of challenges and eventually collapsed.
Witness testimony raises concerns
The key development in the ongoing trial of Do Kwon and Shin Hyun-seung came from the testimony of Mr. Lee, a former development team leader at Terraform Labs. Mr. Lee revealed that he knew the legal limitations surrounding the Terra project while working for the company. According to him, the Terra project was considered “legally impossible.”
When questioned by the prosecutor about how he became aware of this, Mr. Lee stated that he “heard it through (Terraform Labs founder) Kwon Do-hyung.” This revelation implies that the co-founders were aware of the legal hurdles associated with TerraUSD.
In response to the witness’s claims, the defense vehemently denied the allegations, labeling them ” untrue.” They argued that Do Kwon and Shin Hyun-seung had never acknowledged that South Korean financial regulations prohibited TerraUSD from being a payment option via “Chai Pay.” Instead, the defense asserted that the co-founders had expressed a different viewpoint and did not believe the legal limitations applied.
Ongoing legal proceedings
The legal proceedings against the co-founders are unfolding simultaneously. While Shin Hyun-seung’s trial is underway, Do Kwon remains in custody in Montenegro. The decision regarding Do Kwon’s potential extradition is expected before February 15, which marks the expiration of his detention.
The testimony of Mr. Lee has raised significant concerns about the conduct of Do Kwon and Shin Hyun-seung during their tenure at Terraform Labs. The allegation that they promoted TerraUSD as a payment option despite being aware of its legal impossibility could have far-reaching implications for their defense.
If the court finds merit in Mr. Lee’s testimony, it could lead to serious consequences for the co-founders, including criminal charges related to financial regulations. This case underscores the importance of adhering to legal guidelines and regulations within the rapidly evolving cryptocurrency and blockchain industry.
