- US SEC now has the approval to probe Daniel Shin of Chai Corporation.
- This firm has close ties to Terraform Labs and was co-founded by Daniel Shin and Do Kwon.
The United States Securities and Exchange Commission (SEC) is seeking to understand the relationship of Do Kwon and Chai Corporations with Terraform Labs. Hence, the regulator plans to have a chat with Terraform Labs co-founder Daniel Shin now that it has been granted a motion to do so from South Korea.
The SEC filed a motion in July asking for permission to question Shin while requesting documents as evidence from Chai Corporations, the Seoul-based payment firm that he founded. The U.S. regulator is trying to prove its suit which accused Do Kwon of engaging in an illegal scheme that led to the loss of over $40 billion in cryptocurrency.
Some of the questions intended for the Terraform co-founder are his role at Chai, Do Kwon’s role in establishing Chai, how Chai utilized the Terra blockchain, why Chai Corporations separated from Terraform Labs, and when it happened, and many others. This line of questioning is necessary as it is suspected that Chai used Terraform to process and settle transactions that are now under review.
It was not until Wednesday, August 16th, that District Judge Jed Rakoff approved the motion citing that the SEC can leverage a process dictated by a 1979 treaty governing requests to secure evidence internationally. Notably, Chai Corporations was reportedly founded by Shin and Kwon in mid-2019. Both Terraform and Chai shared offices and staff until 2020 when they went their separate ways.
Kwon Becomes a Global Person of Interest After Terra Collapse
Kwon, the former Chief Executive Officer (CEO) of Terraform Labs has been under tight scrutiny since the crash of the firm and its associated crypto Terra and UST. Last year, a court in Seoul issued a warrant of arrest against Kwon. This gave the Financial Crimes Unit of the Supreme Prosecutors Office the authorization to arrest the then-young billionaire and five other people suspected to be involved in the $40 billion collapse of its crypto empire.
The Korean authorities claimed that all six of the firm’s executives violated the Capital Markets Act. Getting to Kwon was not as easy as the police anticipated and it looked like he was not willing to cooperate with prosecutors at first. A few weeks later, Interpol issued a red notice asking law enforcement agencies worldwide to locate and arrest the crypto pioneer. The crypto boss became a fugitive wanted in several countries until his arrest in Montenegro.
While Kwon had uncovered charges in South Korea, the SEC hit the Terraform chief with additional charges including the violation of registration and anti-fraud provisions of the Securities Act and the Exchange Act. For context, the regulator alleged that from April 2018 to May 2022 conducted many unregistered transactions and made billions of dollars in profit.
Eventually, Kwon was arrested and has been under detention in Montenegro where he was nabbed for trying to travel with fake documents. Kwon and Terraform Labs made no attempt to deny their wrongdoing or oppose SEC’s request to question Shin. Instead, they have requested evidence to defend their case.
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