•Daniel Shin, co-founder of Terraform Labs, is accused of selling a $105 million hoard of Terra’s LUNA tokens at the cryptocurrency’s peak price without regular investors being made aware.
• Prosecutors argue that Terra’s LUNA cryptocurrency constitutes a financial investment security and that Shin should be arrested.
• Shin claimed that more than 70% of his LUNA holdings were sold prior to the price surge and he still held a significant amount at the time of the cryptocurrency crash.
• If arrested, Shin would join fellow early investor and Terraform Labs engineer Do Kwon who is already facing charges including a $57 million class-action lawsuit.
Daniel Shin, co-founder of the cryptocurrency Terra, is being investigated by prosecutors for selling his hoard of LUNA tokens at the cryptocurrency’s peak price. Shin sold his tokens for a total of $105 million, and prosecutors argue that the LUNA tokens constitute a financial investment security. If arrested, Shin would join fellow early investor and Terraform Labs engineer Do Kwon, who is already facing charges including a $57 million class-action lawsuit.
What Is Terra?
In case anyone has forgotten, Terra is a South Korean blockchain platform that was launched in 2018. The platform has its own cryptocurrency, called LUNA, which is used to power its transactions. Terra claims to be more stable and efficient than other cryptocurrencies, due to its use of a “Bonding Curve” algorithm. This algorithm allegedly allows Terra to avoid the wild fluctuations in price that have become commonplace in the cryptocurrency market. The company fell to pieces due to the stablecoin not having real backing and with the collapse came the fall of many other crypto firms. The other CEO of Terraform labs has been missing for months, hiding in an undisclosed location with Interpol on his heels.
The Investigation into Daniel Shin
It was reported that Daniel Shin, co-founder of Terraform Labs, had sold a $105 million hoard of Terra’s LUNA tokens at the cryptocurrency’s peak price without regular investors being made aware. The report sent shockwaves through the cryptocurrency community, with many wondering if Shin had taken advantage of his position to profit at the expense of other investors. Shin has since denied any wrongdoing, but the damage may have already been done. If Shin is found to have sold his tokens without disclosing this information to other investors, it could have serious consequences for him.
Prosecutors allege that Daniel Shin sold his LUNA tokens after artificially inflating the price of the cryptocurrency through “pump and dump” schemes. Pump and dump schemes involve groups of investors coordinating to buy up a particular asset in order to drive up its price, before selling it off at a profit. These schemes are illegal in most financial markets, as they can lead to market manipulation and fraud.
Shin has denied these allegations, claiming that he sold his LUNA tokens prior to the price surge and still held a significant amount at the time of the cryptocurrency crash. However, prosecutors argue that more than 70% of Shin’s LUNA holdings were sold during the pump-and-dump scheme. If charged, Shin faces up to 10 years in prison.
Do Kwon is already facing charges related to the Pump and Dump Scheme. Kwon is being sued for $57 million by complainant Ryan Cheong. Cheong alleges that he and other investors were lured into buying Terra’s LUNA token by false promises made by Kwon and other members of Terra’s team.
Kwon has denied these allegations, claiming that he did not participate in any pump-and-dump schemes and that he continues to hold a significant amount of LUNA tokens. However, prosecutors believe that Kwon played a key role in coordinating the scheme and are seeking to arrest him on charges of securities fraud. Kwon still remains at large as authorities are unsure as to his whereabouts.
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