Seoul court rejects warrants for former Terraform Labs employees and investors over Luna collapse 

A Seoul court rejected a request from prosecutors for warrants to detain eight people related to Terraform Labs, including the co-founder of Terraform Labs, Daniel Shin, early investors and former engineers.

It’s difficult to believe they would flee or destroy evidence as Shin and the seven other suspects have been cooperating with the investigation, Yonhap News said, citing the Seoul court. In addition, the suspects also need to be guaranteed their rights to defend themselves against the allegations of capital market rules, which is the core accusation of this case, according to the court, per Yonhap. 

The Seoul Southern District Prosecutors Office told TechCrunch that it is hard to understand that conclusion as the court knows the seriousness of the allegation and the fact that some of the suspects allegedly made money by selling Luna tokens before the collapse. And yet, the court dismissed the warrants, saying the eight people need to have rights to defend their cases against accusations.

Shin is being charged with taking illegal profits worth about $105 million by selling Luna tokens when it was near its all-time high without disclosing this move to investors. It happened before the collapse of the TerraUSD and Luna earlier this year, contravening the Capital Market Act. Prosecutors also suspect Shin used customer data from his separate fintech startup called Chai to promote Luna, violating the Electric Financial Transaction Act. The other seven people involved in Terraform were also alleged to have similar charges.

Shin has denied the claims of trading Luna at a market high and violating the customers’ data. Terraform was founded in Singapore in 2018 by Do Kwon and Shin. Shin left Terraform in March 2020 to found Chai and stepped down as CEO of Chai earlier this year.

South Korean prosecutors began the investigation after the crash of the UST-Luna token earlier this year, which wiped out $40 billion in market value. In September, South Korea issued an arrest warrant for another co-founder, Kwon, whose whereabouts are currently unknown, and requested Interpol, the international law enforcement agency, to issue a red notice for Kwon.

Terraform Labs could not be reached for comment.