• A former employee at Terra has testified that Do Kwon promoted the TerraUSD stablecoin as a payment option to prospective investors despite local laws outlawing such payments.
• Daniel Shin, one of the co-founders, sought to dismiss the testimony, claiming it was not true while sticking to an earlier argument that South Korea lacks crypto payments guidelines.

A former developer at Terraform Labs (TFL) has testified in court against the former executives of the blockchain project, implicating Do Kwon, Daniel Shin, and others in violations of the country’s payment laws.

Only identified by court documents as Lee, the developer told the 14th Criminal Division of the Seoul Southern District Court that TFL’s management touted the TerraUSD stablecoin (known as UST in the crypto world) as a viable payment option. This was despite explicit knowledge that South Korea prohibits such unlicensed payments and is in breach of the country’s financial laws.

Appearing before Presiding Judge Jang Seong-hoon, Lee further implicated Kwon, Shin, and others in the crime; he told the court that they openly admitted that the local laws didn’t permit UST payments but marched on with their efforts to advertise UST as a stablecoin payment method.

When asked by the prosecutors how he knew that what the company was offering was illegal, Lee stated, “I heard it through (Terraform Labs founder) Kwon Do-hyung.”

Shin’s defense team was present at the hearing and refuted the statement. Shin, who once served as the TFL CEO, said that whenever he was asked if UST was a viable payment in Korea, he would explain that it wasn’t. His legal team also pointed out that he left the company about two years before it collapsed in May 2022, and as such, he shouldn’t be held liable for the mistakes of the people he left behind.

Kwon & Co. Being Held Liable for the $60 Billion Terra Catastrophe

Terra was once one of the industry’s most successful projects, and Kwon was regarded as an industry great alongside the likes of SBF and CZ (curiously, all three have fallen, some more than others). Its LUNA token was one of the largest in the market, and UST stablecoin was gaining significant market share.

Then came the collapse, and since then, authorities have been pursuing the men behind the project. Kwon was arrested in Montenegro and jailed for document forgery, while his fellow executive Han Chang-Joon was deported to Korea this week.

Shin, a co-founder, was first charged with fraud last year by Korean authorities. He was also accused of embezzlement and breach of duty for his role in the collapse that wiped out $60 billion of investors’ money. It also sparked a domino effect that took out dozens of projects, including Three Arrows Capital, Genesis Capital, BlockFi, Celsius Network, and more.

Shin’s defense has included allusions that Korea failed to implement crypto laws. Thus, he and his partners can’t be liable for breaching non-existent laws. But like CZ and SBF have found out the hard way, the “we didn’t know you require crypto to follow the law” routine doesn’t work anymore.