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Wednesday, June 12, 2024

Prosecution targets Kernel Labs in investigation of Terra coins’ crash

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Terraform Labs CEO and co-founder Do Kwon [SCREEN CAPTURE]
Terraform Labs CEO and co-founder Do Kwon [SCREEN CAPTURE]

The prosecution is targeting blockchain consultancy firm Kernel Labs in its investigation into the crash of Terra coins in May.

It raided Kernel Labs office over two days on July 20 and 21, and also called in 27 employees from the company for questioning.

Kernel Labs is speculated to have links with Terraform Labs, according to local media reports.  

Kernel Labs is a blockchain consultancy firm. Its website reads, “we have designed and launched decentralized apps, blockchain payment systems, and core infrastructure at scale.” It adds, “we guide every step, from mechanism design to project launch.”

Kernel Labs was founded in 2018 and is headquartered in Seongdong District in eastern Seoul, according to Nice Information Service, a credit information provider.  

Kim Hyun-joong sits as the company CEO, according to the data. He was vice president of engineering at Terraform Labs, according to a report from the local media outlet The Sunday Times in May.  

“Kernel Labs employees worked at the Terraform Labs Korea office,” said Kang Hyung-suk, a former software engineer at Terraform Labs.  

The Seoul Southern District Prosecutors Office raided seven crypto exchanges, including Upbit and Bithumb, as well as Terraform Labs’ early-stage investors, including Chai Corporation and Dunamu and Partners in July.  

Flexe Corporation, speculated to be Terraform Labs’ shell company, and the residence of Terraform Labs co-founder Daniel Shin was also raided in the same month.  

Following a $40 billion crash of Terra coins, lawsuits have been filed against Terraform Labs and its co-founders Do Kwon and Shin in countries including Korea, the United States, and Singapore. They are being investigated on charges of fraud and fundraising without approval in Korea.  

The prosecution prohibited Shin and former and current employees of Terraform Labs and Kernel Labs from leaving Korea. The Ministry of Justice also approved the prosecution to be notified when Kwon enters Korea from Singapore, where he is believed to be staying.

The value of TerraUSD, a stablecoin designed to be pegged to $1, and sister coin Luna plummeted in mid-May. Luna was once No.8 globally in terms of market capitalization, peaking at almost $120 in April. It collapsed to trade at less than a cent.  

Kwon argued that he “lost most of what I had in the crash” and insisted that there is a difference between failure and fraud in an interview with the Wall Street Journal in June.  

BY HA JUN-HO, JIN MIN-JI [jin.minji@joongang.co.kr]