Shin Hyun Seung, also known as David Shin, a co-founder of Terraform Labs, has been summoned by prosecutors amidst serious allegations related to the cryptocurrency LUNA, now known as Luna Classic (LUNC). Prosecutors accuse Shin of breaching his duties and improperly utilizing Chai Corporation and its customer information to promote Terra’s stablecoin and the Luna cryptocurrency. This comes despite Shin's testimony in 2020 where he claimed to have severed ties with Do Kwon and Terraform Labs, subsequently focusing on Chai Corporation, a payment technology provider where he currently serves as CEO and Founder.

The legal scrutiny surrounding Terraform Labs' co-founders is not a new development. The company experienced a catastrophic event in May 2022 when the Terra stablecoin and Luna cryptocurrency plummeted after an unidentified withdrawal of $2 billion UST. Following this crash, in July 2022, Terraform Labs CEO Do Kwon was also charged with violating local capital market regulations, and was later issued a “notice upon arrival” by South Korean authorities. Concurrently, Shin Hyun-Seung has been placed under a travel ban by the same prosecutors investigating the Terra-LUNA collapse.

Further detailed charges against Shin were recently confirmed by a prosecutor from the Seoul Southern District Prosecutors’ Office. Shin is accused of storing pre-issued LUNA tokens without informing regular investors and subsequently generating profits exceeding 140 billion Korean Won (over US$106 million) by selling these tokens at their peak. This action has been explicitly flagged as fraudulent and a direct violation of local capital market law, intensifying the legal challenges faced by the Terraform Labs leadership.

The ongoing investigation extends beyond the co-founders, with arrest warrants also obtained for five additional Terraform Labs associates. These individuals include Nicholas Platias, the former director of research at Terra, and Han, the CEO of Chai Corporation. These legal actions against Kwon and Terra lend significant credence to the claims that investigators are indeed probing the Terra-LUNA collapse for possible fraud. Authorities are particularly interested in questioning Shin regarding his potential awareness of alleged insider trading and price manipulation schemes orchestrated by Terraform Labs to artificially inflate and support the price of the Luna cryptocurrency.