Terraform Labs Co-Founder Denies Involvement, Blames Do Kwon's Management For Terra's Collapse

Daniel Shin, the co-founder of blockchain firm Terraform Labs (TFL), has denied any involvement in the spectacular collapse of Terra in May 2022 and blamed it on Do Kwon, the other co-founder and CEO of the firm.

The 38-year-old, who co-founded Terraform Labs in 2018, appeared before a court in South Korea on Monday and denied all charges against him related to the collapse of the Terra Ecosystem in 2022, which sent shockwaves to the entire cryptocurrency industry.

Instead of acknowledging that he had a hand in the blockchain firm, Shin, who also co-founded Chai Corporation, laid the blame on Kwon, saying his "unreasonable" management practices of Anchor Protocol, the decentralized savings protocol offering low-volatile yields on Terra stablecoin deposits, led to the historic collapse.

Moreover, Shin, whose assets in South Korea were frozen by authorities, distanced himself from Kwon. His lawyers argued that his association with the blockchain company he co-founded ended in 2020.

"We parted ways with CEO Kwon for business purposes in 2020. The cause of the coin plunge was the unreasonable operation of the Anchor Protocol conducted by CEO Kwon and external attacks, " Shin's lawyer reportedly said during the trial held at the Seoul Southern District Court. "[It] has nothing to do with CEO Shin."

Shin is facing trial for fraud, illegal fundraising and capital market law violation. He denied all the charges against him.

In September, the U.S. Securities and Exchange Commission (SEC) presented a new set of documents before a court, highlighting the crypto entrepreneur's role in faking trading volumes.

One of the documents included a conversation allegedly between Shin and Kwon, which the financial regulator described as an "extensive private chat" that took place during the "early stages" of Chai and TFL's "formation and partnership."

At one point, Kwon shared with Shin how he planned to use Chai to make "fake transactions on the Terra blockchain which would appear real and generate fees," the document showed. When Shin asked "Wouldn't people find out it's fake," Kwon played down his concern and assured him he would "make it difficult for anyone to discover the fraud." Ultimately, both Shin and Kwon agreed to test the plan out on a "small scale."