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U.S. indicts Do-hyung Kwon on 8 charges including ‘securities fraud’… 7 charges applied to Korean ships

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Dohyung Kwon, CEO of Terraform Labs (Screenshot from Bloomberg Bloomberg)

South Korean and U.S. judicial authorities are applying at least 7 and 8 charges against Terraform Labs CEO Kwon Do-hyung, respectively. There are observations that if the investigation begins in earnest with the arrest of CEO Kwon, there is a high possibility that the charges will increase.

According to the legal community on the 24th, the prosecution, which issued an arrest warrant for CEO Kwon in September of last year, was charged with violating the Capital Markets Act at the time (fraudulent illegal transactions, violation of conspiracy regulations), fraud, breach of trust, violation of the Electronic Financial Transactions Act, similar receipts, and specific financial transactions. Seven charges, including violation of the information law, were applied. An official from the prosecution explained, “It is only a part of the charges that we identified before investigating Kwon, and there is a high possibility that the number of charges and crimes will increase if he is directly called and investigated.”

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At the end of last year, the prosecution also requested an arrest warrant for Shin Hyun-seong, CEO of Chai Corporation, who was a close associate of CEO Kwon and co-founder of Terraform Labs, who had stayed in Korea all along. However, the court at the time dismissed it. In order to apply the Capital Markets Act, the ‘securities’ of virtual currency must be recognized, but an analysis was raised that this is because there is no precedent that ‘virtual currency = securities’.

The U.S. District Attorney’s Office for the Southern District of New York listed eight charges against Kwon in an indictment released on the 23rd (local time), including conspiracy to commit fraud, conspiracy to commit fraud and market manipulation, product fraud, securities fraud, and wire fraud. In particular, for product, securities, and telegraphic fraud, the period of suspicion was divided into two periods, 2019 to 2022 and 2021 to 2022, respectively, and applied to six cases.

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Separately, Bloomberg News reported that the US authorities are also investigating whether Terra and Luna are connected with the US virtual currency exchange FTX, which went bankrupt in November last year.

If Kwon is extradited from Montenegro to the United States first, the New York Southern District Prosecutor’s Office, which is famous for investigating white-collar financial crimes, will be in charge of the investigation. The investigation into Sam Bankmanfried, the former founder of FTX, which is currently under trial, was also undertaken here.

Source: Donga

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