<Anchor>

Yesterday (5th), we reported on the Terra and Luna crash alone, and we will continue that news today. In 2019, Kwon Do-hyung and other key business figures launched a payment system called "Chai Pay." The prosecution determined that Terra was a payment system that was promoted as a means of payment, which was also fictitious.

Reporter Kim Deok-hyun contributed to this report.

<Deokhyun Kim>

Hyunsung Shin, co-founder of Terraform Labs, emphasized the advantages of the "ChaiPay" system that utilizes the Terra blockchain even three weeks before the Terra and Luna crash.

[Hyunsung Shin/Co-Founder, Terraform Labs: Chai has grown and evolved a lot since the launch of Terra 1 dapp. You can charge it with Terra through Terra Station and use it for payment....]

In other words, you can pay with Terra through Chai Pay.

However, according to the court's "Preliminary Decision" obtained by SBS, the prosecution determined that "the core group of the Terra project, including Shin Hyun-sung and Kwon Do-hyung, planned their business from the beginning by recording only payment details on the blockchain."

It is no different from a regular payment system that is topped up with cash, but it deceived investors as if payments were made with the Terra blockchain system.

In particular, prosecutors believe that in March 2019, they developed a system that steals customers' payment history information from ChaiPay servers, transmits them to the Terra blockchain, and records them in real time, and for nearly three years, they falsified Terra Coin's blockchain transactions through ChaiPay.

Through this method, the prosecution estimated that the transaction amount recorded on the blockchain without actual Terra coin transactions was more than 7 trillion won combined with deposits and withdrawals.

In this regard, Mr. Shin Hyun-sung explained, "Before separating the business from Mr. Kwon Do-hyung, Chai used the Terra blockchain to proceed normally with the payment business."

He also said, "If there is a misunderstanding, we will call it out in an open court if we are charged."

(Video Interview: Lee Yong-han, Video Editing: Kim Jun-hee, CG: Jang Sung-beom and Kang Yoon-jung)

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<Anchor>
Key people in
this business were allocated a large amount of Luna Coin before being listed on cryptocurrency exchanges. Since then, its value has skyrocketed, and prosecutors estimate that the value of the co-founder's coins once reached 5.5 trillion won.

This is followed by an exclusive report by reporter Lee Tae-kwon.

<Reporter Lee Taekwon>

From the end of 2018 to April of the following year, the first seven members of the Terra project were allocated up to 70 million shares per person before Luna Coin was listed in Korea.

In particular, co-founders Hyunsung Shin and Dohyung Kwon secured 38 million and 70 million Luna, respectively, for as low as 0.49 won each.

Prosecutors believe that after the coin was listed, they used the automated trading program "bot" to ride a bicycle to steadily increase Luna's price, and when the value skyrocketed, they sold it and cashed it out.

The prosecutor's office stated that in the case of Mr. Shin, the profits realized by disposal on domestic exchanges were at least 147.9 billion won.

On April 5 last year, when Luna peaked, Luna rose to $116 apiece and 145,000 won in Korean currency, and prosecutors said in a preliminary decision that the profits obtained at this time amounted to up to 5.5 trillion won.

The value of the initial allocation was about 18 million won, but it is believed that it has skyrocketed 300,000 times.

By the same standard, the highest value of Kwon Do-hyung's Luna coin is more than 10 trillion won.

The U.S. Securities and Exchange Commission said Kwon siphoned off 10,000 bitcoins in the process of fleeing and deposited them in a bank in Switzerland.

It was estimated to be worth about 370 billion won, but about 130 billion won has already been withdrawn.

In this regard, Shin's side disposed of most of its coins when he broke with Kwon in 2020, refuting the allegations of astronomical unfair gains presented by the prosecution, saying that this was before the value skyrocketed.

(Video Interview: Choi Choi-woong, Video Editing: Kim Yoon-sung, CG: Kim Han-gil)

<This is the full text of Shin Hyun-sung's statement to SBS>

1. Before the separation of the business from the winding diagram, the difference was that the payment business was carried out normally using the Terra blockchain, and many benefits were granted to simple payment customers and merchants with the profits generated from the blockchain. The so-called mirroring method was carried out according to the results of consultation by a large reputable law firm on the relevant laws and financial authorities' policies, and it was also an appropriate solution in the transitional situation of the regulatory vacuum at the time. Mirroring is a method that is commonly used in the fintech field, and when the Financial Services Commission recently announced a plan to issue token securities, it said that it would be implemented as a mirroring method until the relevant laws are amended, which also takes into account the transitional situation before the amendment of the law.

2. In 2020, CEO Shin parted ways with Kwon Do-hyung due to disagreements over the direction of the project, completely separated the organization and business from Terra, gave up much of his terra shares or tokens, and has not been involved in Terra's operation since. When Shin left Terra, it was in the early stages of the Terra project, even before UST was released, and the price of Luna was about 1 won, less than 500/300 of what it was just before the crash. Shin sold most of the Luna he disposed of before the surge, and just by looking at the trading pattern, you can see that he did not expect Luna's surge or crash at all.

3. We kindly request that you bear in mind that the contents of the preliminary judgment are not only not judicially confirmed, but also that the reasons for the dismissal are set forth by the court in the examination of the 13 arrest warrants that have been dismissed so far are contested and that it is necessary to guarantee the right to defense. If indicted, Shin will go into detail about many of the misconceptions made by prosecutors in an open courtroom.


PDF file
of the court's preliminary ▶ decision ※ When using, specify 'Source: SBS'