Terra founder Do Kwon is caught in a lawsuit

Terraform Labs co-founder Do Kwon continues to court more legal battles following the collapse of the Terra ecosystem. Do Kwon was summoned by the Political Affairs Committee of the National Assembly to hold a parliamentary hearing on the issue, and South Korea's national tax agency fined him $78 million (approximately 100 billion won) for tax evasion.

Terraform Labs first came under the scrutiny of tax authorities last June for allegedly evading corporate and income taxes. An investigation into Terraform Labs and its various subsidiaries revealed that the company is registered in the Virgin Islands and Singapore.

Although both subsidiaries are registered abroad, the "actual place of management" is South Korea itself. Under the Korean corporate tax law, a foreign-registered company is considered a domestic company if the decision-making process and operations are conducted in Korea.

In October last year, Terra 's Virgin Islands subsidiary was slapped with a $3.6 million income tax penalty and a $34.7 million corporation tax penalty.

Information obtained from the Korea Supreme Court Registry shows that Do Kwon successfully dissolved two Korean branches. Both the Busan headquarters and the Seoul office agreed to dissolve at the shareholders' meeting on April 30, with actions taking place on May 4 and May 6, respectively. The timing of these decisions has raised doubts within the crypto community due to their possible connection to the unpegging of the Terra and UST stablecoins in the early hours of May 10.

Do Kwon has denied allegations that he failed to meet his tax obligations in South Korea, saying it was a "pure coincidence" that the closure of TerraUSD 's operations in South Korea came just days before the de-peg event.

Do Kwon tweeted: "I have been in Singapore since December last year - this is my personal decision and it was planned long ago. Closing a company takes some time and the timing is purely coincidental."

He said: “We don’t owe taxes in Korea. The National Tax Service conducted tax investigations on all large crypto companies operating in Korea and applied Korean tax laws to foreign parent companies. As a result, all companies paid taxes — all of us. paid."

Following the collapse of the TerraUSD (UST) stablecoin this month, South Korean police are taking action to freeze assets related to Luna Foundation Guard (LFG), and the Seoul Metropolitan Police Department has asked multiple exchanges to block LFG withdrawals, South Korean media KBS reported on Monday. any company funds.

However, according to KBS, these exchanges are not subject to the law, which means that it is unclear whether these actions will be implemented. Police said they intervened after they found clues of misappropriation of funds within LFG.

In addition, Terra and Luna victims recently filed a lawsuit against South Korean prosecutors over investment fraud allegations, claiming that CEO Do Kwon suffered huge losses because he did not inform the dangers of virtual currencies, and that the police’s request to freeze funds is separate from the investment fraud complaint case. Yes, the police have not yet disclosed how the investigation will be carried out.

South Korea's joint investigation team for financial securities crimes officially launched an investigation into Terra, including core members of the team including Terra's co-founder Do Kwon. The South Korean Financial Securities Crime Joint Investigation Team is composed of members from different financial regulatory agencies and aims to prosecute securities fraud and unfair transactions. Terra is the first case investigation launched after the investigation team was reorganized.

A representative of the law firm LKB & Partners said, "Luna and Terra were designed and issued to attract investors, but failing to properly inform them of their flaws and the unlimited expansion of Luna's offering is tantamount to defrauding investors." .

South Korean regulators have released a new report with a series of recommendations on how to properly manage the country’s crypto industry. The report recommends that the domestic crypto industry adopt a licensing system for exchanges and token issuers to protect investors.

The Financial Services Commission (FSC) report to the National Assembly also called for new regulations to reduce insider trading, pump and dump schemes and wash trading. The new regulations will be stricter, and penalties for non-compliance will be harsher than the Capital Markets Act that the domestic crypto industry currently complies with.

The report “Comparative Analysis of the Virtual Property Industry Act” reveals that it is proposed to establish a licensing regime applicable to token issuers, with varying degrees of licenses to be issued depending on the risks involved.

A proposed regulation would force token issuers to submit to the FSC a white paper on their project, including details about the company’s executives, how it plans to use funds raised through an ICO and the risks associated with the project, which must be at least Submit an update to the white paper 7 days before the proposed changes take effect.

Even foreign-based companies must abide by the white paper rules if they wish to trade their tokens on Korean exchanges.

Author: Amy Liu

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