SEC’s Motion to Question Daniel Shin

The U.S. Securities and Exchange Commission (SEC) has scored a win in its ongoing investigation by gaining permission to question Daniel Shin, the co-founder of Terraform Labs. This decision stems from a push by the SEC to understand the inner workings of Terraform and its connection to Shin’s payments platform, Chai Corporation.

Judge Rakoff’s Approval

On August 16, District Judge Jed Rakoff greenlighted the SEC’s motion filed on July 10. The SEC aims to gather information regarding Shin’s insights on fellow co-founder Do Kwon’s role at Chai, how the company leveraged the Terra blockchain, and the nature of Chai’s disclosures related to Terraform.

Chai and Terraform’s Relationship

Shin and Kwon founded Chai in mid-2019, but the two firms shared more than just office space; they shared a network of intertwined operations until their split in 2020. This breakup raises questions that the SEC is eager to nail down. Why did Chai decide to part ways with Terraform? Was it a case of creative differences or something more concerning?

Lawsuits and Allegations

The SEC’s inquiry is part of a broader lawsuit against Terraform and Kwon, which kicked off in February. The SEC claims that the cryptocurrencies TerraClassicUSD (USTC) and Terra Luna Classic (LUNC), which previously held substantial market value, were part of a fraudulent scheme. Kwon and Terraform are accused of misleading the public about the integration of their blockchain technology in facilitating transactions through Chai.

The Fallout from Terra’s Collapse

The now-notorious collapse of Terra’s interconnected ecosystem in May 2022 erased about $40 billion in value, sending shockwaves through the entire cryptocurrency market. Shin is not just facing questions from the SEC; he has also been hit with multiple fraud charges by South Korean prosecutors for allegedly downplaying the investment risks associated with Terraform’s cryptocurrencies.

Kwon’s Current Legal Troubles

As if things couldn’t get worse, Kwon is currently behind bars in Montenegro for attempting to leave the country using a fake passport. He’s juggling criminal charges not only from the SEC but also from authorities in both the U.S. and South Korea, both of whom have submitted extradition requests.

In Summary

The SEC’s move to question Daniel Shin could be a crucial step in piecing together the saga of Terraform Labs. The questions surrounding Chai and Terraform’s financial relationship could provide key insights into the operations that led to a catastrophic market collapse.