Terra’s Do Kwon Is Being Investigated for Tax Fraud

Prosecutors have started to investigate Terraform Labs CEO Do Kwon for tax evasion, according to reports from local media.

South Korean Prosecutors Seize Tax Data

SBS News reported today that the Seoul Southern District Prosecutor’s Office’s Joint Financial and Securities Crime Investigation Team has begun to investigate Do Kwon for tax fraud.

Prosecutors reportedly conducted a search and seizure of the country’s National Tax Service—specifically the 4th Bureau of Investigation of the Seoul Regional Tax Office.

The data obtained showed that, in June 2021, the National Tax Service discovered a “suspicious flow of money from an overseas corporation” transacting between Singapore and the Virgin Islands.

The National Tax Service found that Kwon had stolen profits by evading imposed taxes of 50 billion won ($39 million). However, it did not report those findings to the prosecution.

The prosecution is also investigating allegations around Kwon and gift taxes. Specifically, Kwon is said to have donated funds to his family in order to facilitate the purchase of an apartment.

Investigation of Terra Continues

Rumors of tax evasion have been circulating around Kwon for some time. On May 19, shortly after Terra began to collapse, it was said that Kwon owed 100 billion won ($78 million) in taxes.

Kwon denied tax evasion at that time, stating that his project had “no outstanding tax liabilities in Korea.” His statements suggest that he merely paid a fine to tax authorities following an audit due to differences in international business regulations.

Authorities also launched other investigations into Terra the week of May 17. Various potential charges were named at the time, including fraud, price manipulation, and operation of a Ponzi scheme.

Investigations continued in other areas. On May 23, police attempted to freeze funds related to the project. On May 30, authorities summoned Terraform Labs employees to discover whether those employees were aware of Terra’s risks and design flaws.

The collapse of the Terra blockchain began in early May and continued throughout most of the month.

The project’s TerraUSD (UST) and Luna Classic (LUNC) tokens now have virtually zero value. Meanwhile, the blockchain’s revived Luna token (LUNA) maintains a value of $2.34.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.