A former developer at Terraform Labs, known only as “Lee,” reportedly took the stand on Monday at the 14th Criminal Division of the Seoul Southern District Court, testifying against the company’s co-founders, Kwon Do-hyeong and Shin Hyun-seung.
The witness, formerly a leader within the Terra development team, provided crucial testimony against Terra founder Do Kwon and Terraform Labs co-founder Shin Hyun-seung.
According to a local media outlet report, Lee testified that in a discussion with Kwon himself, who had acknowledged that South Korean financial regulations prohibited using TerraUSD as a payment method, suggesting Terra executives were aware of the stablecoin’s regulatory constraints.
Lee’s testimony also shed light on Terra’s operational strategy, which sought to establish LUNA as a viable currency via the “ChaiPay” payment system. This model projected potential profits linked to the anticipated appreciation of the LUNA token’s value.
After the failure of the Terra-Luna crypto project in 2022, South Korean prosecutors accused Kwon, Shin, and Terraform Labs of investor fraud through the misleading promotion of Terra’s USD-pegged stablecoin as a viable payment option, among other charges.
Shin countered by claiming that regulatory ambiguity surrounded crypto payments and claimed he had severed ties with Terra two years before its collapse.
Defense Challenges Testimony
However, the defense team representing Shin Hyun-seung challenged the accuracy of Lee’s statements, disputing his claims regarding Kwon and Shin’s awareness of the impossibility of Terra payments. They emphasized discrepancies between Lee’s assertions and the presented facts, suggesting a more complex narrative than portrayed.
The prosecution’s case is based on the assertion that Shin Hyun-seong and members of the Terra organization collaborated with Kwon and others to realize profits through fraudulent means by falsely promoting the “Terra Project” from July 2018 to May 2022.
Eight individuals associated with Terra, including Shin, are suspected of violating South Korea’s Capital Markets Act. The hearing marked the third trial of Shin Hyun-seong, former CEO of Chai Corporation, who was indicted in connection with the Terra and Luna collapse.
In a related development, former Terra CFO Han Chang-joon, an important associate of Kwon, was extradited from Montenegro to South Korea on Monday. Han is anticipated to undergo investigation by local prosecutors upon his arrival in Seoul on Tuesday afternoon.