Terra Classic

<p>Shin Hyun-seong, popularly known as Daniel Shin, has <a href="https://www.newspim.com/news/view/20231030001028" rel="noopener noreferrer nofollow">refuted</a> accusations against him related to the $40 billion collapse of the stablecoin TerraUSD and its companion token, LUNA, according to a report by local news outlet Newspim. He presented this defense during his initial trial at the Seoul Southern District Court on October 30 (local time).</p><p>Shin co-founded Terraform Labs, the company responsible for issuing TerraUSD and LUNA. His co-founder, Do Kwon, is currently serving a four-month prison sentence in Montenegro for passport forgery.</p><h2 id="header-0">Prosecution’s allegations</h2><p>Korean prosecutors allege that since 2018, Shin and his colleagues have concealed the fabricated nature of the “Terra project.” By manipulating trades and releasing misleading information, they purportedly misled investors into thinking the project was successful. It’s believed they sold off their tokens before the LUNA crash in May 2022, earning KRW 462.9 billion ($343.3 million) from these activities. They are suspected of personally taking KRW 376.9 billion from this amount.</p><p>Prosecutors are focusing on Shin as the potential orchestrator of the LUNA crash. They speculate he began selling LUNA tokens around when Terraform Labs launched the Anchor Protocol in March 2021. This DeFi protocol increased the popularity and value of LUNA tokens. Before the crash, Shin is alleged to have gained at least KRW 154.1 billion.</p><h2 id="header-1">Defense argument</h2><p>However, Shin’s legal team countered by asserting that Shin had cut ties with Kwon in 2020. They argued the decline of TerraUSD and LUNA was due to Kwon’s mishandling of the Anchor Protocol and an external attack, neither associated with Shin. Regarding the exploit, Terraform Labs has <a href="https://medium.com/&#64;coinness.gl/terraform-labs-accuses-citadel-securities-of-stablecoin-sabotage-b62bec081a8a" rel="noopener noreferrer nofollow">pursued legal action</a> in the United States Southern District of Florida, claiming that American market maker Citadel Securities played a part in undermining TerraUSD in May 2022.</p><p>Defending Shin, his lawyers emphasized that at the inception of the Terra project, there were no legal guidelines specifically for cryptocurrency transactions. Additionally, unlike Do Kwon who kept fleeing abroad, Shin willingly came back to Korea and has been cooperating with the investigation. They also noted he received only 32% of the 70 million LUNA tokens initially promised. Regarding classification, they stated LUNA isn’t legally recognized as a security.</p><p>Shin’s lawyers further argued the prosecution hasn’t clearly identified victims or adequately outlined the components of fraud in this case. They said the prosecution’s case hinges on viewing LUNA as a security. However, Shin’s legal representatives maintained that under the Korean Capital Markets Act, LUNA isn’t a security, making its trades non-fraudulent.</p><p>To counter a US court ruling the prosecution presented — that a token is a security — Shin’s defense highlighted that the verdict is from a lower court and remains contested. Earlier, prosecutors had <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.551082/gov.uscourts.nysd.551082.874.0_2.pdf" rel="noopener noreferrer nofollow">cited a ruling</a> from the United States Southern District Court of New York, which classified the XRP tokens sold to institutional investors as securities.</p>

Terraform Labs Co-Founder Daniel Shin Denies Wrongdoing in LUNA Collapse

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