Terraform co-founder attends court hearing to decide his arrest over cryptocurrency collapse

Daniel Shin, co-founder of Terraform Labs, arrives at the Seoul Southern District Court on Friday. [NEWS1]

Daniel Shin, co-founder of Terraform Labs, attended a court hearing Friday to determine whether he should be arrested for allegedly gaining illegal profits before the massive collapse of the blockchain firm's cryptocurrencies.

Prosecutors have also sought warrants to arrest three other Terraform Labs investors and four engineers of the firm's cryptocurrencies — TerraUSD and Luna.

Terraform Labs has been under investigation for alleged fraud and tax evasion after investors filed complaints against Do Kwon, another co-CEO, in May. An Interpol red notice has been issued for Do, whose whereabouts are still unknown.

Prosecutors suspect Shin stored Luna — which had been pre-issued without notifying regular investors — and pocketed illegal profits worth 140 billion won ($105 million) by selling the tokens at a high point.

Asked about the charges by reporters upon his arrival at the Seoul Southern District Court for the hearing, the 37-year-old did not say anything.

A decision on whether to approve his arrest is expected to come late Friday night or early Saturday.

While there is currently no legal clause on stablecoins and bitcoins under the Capital Markets Act, prosecutors said they view the Luna cryptocurrency as a financial investment security.

Charges against Shin also include violating the Electronic Financial Transaction Act, as the customer information and funds of the fintech firm Chai Corp. were allegedly used to promote Luna, prosecutors said.

Shin has refuted any ties with Terraform Labs following his departure from Do in March 2020, when he moved on to found Chai. Shin stepped down as CEO of Chai earlier this year.

Yonhap