South Korean Prosecutors Bite
In a recent development, South Korean prosecutors have discovered that a payment worth $7 million was made to Kim & Chang, the legal representatives of Terraform Labs founder Do Kwon, just weeks before the eventual collapse of the project.
This has led investigators to believe that company executives had anticipated the implosion, and the funds were an advanced payment to the law firm ahead of a long-running legal battle with creditors and investigators.
Possible Judicial Risks
Officials from the Prosecutor’s Office have expressed their concern and said that sending a large sum of money to a law firm before the crash should be seen as a situation in which they were prepared for judicial risks such as the prosecution’s investigation.
The South Korean authorities are now investigating whether the funds are linked to criminal proceedings under the guise of “legal fees.” Kim & Chang, however, has confirmed the payments but stated that it was difficult to confirm specific details of each case.
Extradition Battle with the US and South Korea
After Kwon’s arrest in Montenegro, Kim & Chang lawyers flew into the region to offer legal services to the embattled founder and Terra’s ex-chief financial officer, Han Chang-joon. Currently, Kwon is facing a herculean extradition battle with the U.S. and South Korea jostling over the rights to take him to trial.
Funds Linked to Terra’s Collapse
South Korean authorities have been tracking the funds linked to Terra’s collapse and have confirmed in a statement that they did not find a “single dollar” belonging to Kwon in the country. However, investigators have since contacted Binance and other digital currency exchanges to freeze Kwon’s funds on their exchanges. Binance has provided Korean law enforcement authorities with the requested assistance, but it remains unclear if Kwon had assets on the platform.
Although none of Kwon’s assets are domiciled in South Korea, authorities say they traced $61 million directly to the Terraform Labs CEO. The U.S. Securities and Exchange Commission (SEC) disclosed that Kwon pilfered over $100 million worth of BTC in the days after the collapse.
Laundering Stolen Funds
Kwon was discovered to have created a consulting company while hiding in Serbia, which analysts posit could have been a ploy to launder some of his stolen funds. Despite an Interpol “red notice” issued against him, Kwon was able to float the new company using his invalidated South Korean passport.
Confiscation of Funds
If it is proven in court that the funds are linked to criminal proceedings under the guise of “legal fees,” they can be confiscated by authorities. In a similar incident, investigators had previously confiscated over $160 million worth of real estate from former Terra executives, including co-founder Daniel Shin.
South Korean prosecutors’ discovery of a payment worth $7 million to the law firm representing Do Kwon, the founder of Terraform Labs, just weeks before the project’s collapse, could be a significant breakthrough in the ongoing investigation.
This payment has raised suspicions that Kwon and other executives anticipated the implosion and were prepared for judicial risks such as the prosecution’s investigation. The investigation is still ongoing, and we await further updates on this case.