South Korean Court Proceedings Begin for Daniel Shin Over Terra Charges

Background: The Collapse That Changed Everything

When Terraform Labs co-founder Daniel Shin (real name: Shin Hyun-Seong) and his partner Do Kwon launched LUNA in 2018, few anticipated the catastrophic fallout that would follow four years later. The pair had built an interconnected ecosystem where LUNA was tied to Terra USD (UST), an algorithmic stablecoin designed to maintain a stable peg. However, when UST’s peg collapsed in May 2022, the entire Terra ecosystem unraveled, erasing approximately $60 billion in value and triggering investigations across multiple jurisdictions.

Terra Classic (LUNC), the rebranded original blockchain token, now stands as a reminder of the project’s explosive failure. Meanwhile, Do Kwon and Daniel Shin have found themselves entangled in separate legal battles globally.

The Charges Against Daniel Shin Mount

Seoul prosecutors took action in April 2023, indicting Shin and nine others connected to Terraform Labs. The charges against the Terra co-founder are sweeping: fraud, violations of the Capital Markets Act, breach of duty, bribery, and embezzlement.

Prosecutors allege that Shin played a central role in the financial deception. According to the Seoul Southern District’s financial crimes director, Dan Sung-han, Shin bore greater responsibility for the “financial fraud” than Do Kwon himself. The prosecution’s case centers on a specific strategy: Shin allegedly promoted UST as a legitimate payment system while being fully aware that offering such services was illegal. More critically, prosecutors claim he disguised ordinary fiat currency transactions within his payments platform company, Chai Corp., to appear as though they were being processed through Terra cryptocurrency.

This deceptive marketing reportedly attracted approximately 122 billion Korean won (roughly $91 million) in venture capital funding to Chai Corp.

The Pre-Trial Hearing Unfolds

The preliminary hearing against the Terra co-founder commenced at Seoul Southern District Court, marking a significant step in the South Korean legal process. According to reports, Shin did not physically attend the proceedings. His legal team continues to coordinate with investigators despite his absence.

Do Kwon’s Parallel Legal Troubles

While Shin faces trial in South Korea, his co-founder has encountered mounting legal challenges elsewhere. Do Kwon was arrested in Montenegro in March 2023 and subsequently sentenced to four months in prison in June 2023 after a district court found him guilty of using counterfeit travel documents. He and Han Chang-joon, Terraform Labs’ former CFO, were accused of falsifying their passports—a conviction entirely separate from the Terra collapse charges.

Shin’s Defense Strategy

Shin’s legal representatives have mounted a straightforward defense: he maintains complete innocence in the Terra collapse. They argue that Shin resigned from Terra and LUNA approximately two years before the ecosystem’s downfall in 2022, severing his involvement well before the crisis occurred. According to his team, this timeline effectively disconnects him from responsibility for the subsequent events.

Furthermore, his lawyers emphasize that Shin voluntarily returned to South Korea to assist with the investigation—a decision they characterize as evidence of his willingness to clear his name. The legal team categorically denies all fraud allegations, positioning their client as a former executive with no operational role during the critical period when the collapse unfolded.

The pre-trial proceedings are now underway with Shin potentially facing trial alongside seven additional former Terraform Labs employees, marking one of the most significant cryptocurrency fraud cases to reach advanced court proceedings.