'Terra·Luna Incident Core' Shin Hyun-sung, First Trial on the 10th of Next Month

First Pretrial Conference Scheduled for July 10 at 10 AM

The first trial of Shin Hyun-sung, former Chief Executive Officer of Chai Corporation, who has been identified as a key figure in the 'Terra·Luna incident,' will be held on July 10.

Shin Hyun-sung, former Chief Executive Officer of Chai Corporation and co-founder of Terra and Luna, is attending a pre-trial detention hearing on the morning of December 2 last year at the Seoul Southern District Court in Yangcheon-gu.
[Image source=Yonhap News]

According to the legal community on the 2nd, the Seoul Southern District Court Criminal Division 14 will hold a preparatory hearing at 10 a.m. on the 10th of next month for Shin, who is charged with fraud, breach of trust, embezzlement, and other offenses under the Act on the Aggravated Punishment of Specific Economic Crimes.

Originally, Shin’s first trial was scheduled for the 26th of last month, but the day before the trial, the case was reassigned from Criminal Division 13 to Criminal Division 14. The reason for the change was a controversy that arose because Judge A, the presiding judge of the previous division, had worked as a reporter for JoongAng Ilbo in 2010 and had interviewed Shin about his success story. A court official stated, "Considering the content of the case and the circumstances of the court, the reassignment was made according to relevant regulations."

Shin and seven accomplices are accused of falsely promoting the 'Terra Project' as successfully progressing from July 2018 to May last year and manipulating transactions so that Luna and Terra coins were traded, thereby obtaining approximately 462.9 billion KRW in illicit profits and habitually defrauding about 379.6 billion KRW (fraudulent unfair trade under the Act on the Aggravated Punishment of Specific Economic Crimes and fraud under the Act on the Aggravated Punishment of Specific Economic Crimes).

They are also charged with issuing Luna coins, which are investment contract securities, and distributing and selling them to investors without submitting a securities registration statement from April 2019 to May 2020, thereby soliciting securities and conducting sales activities (violation of conspiracy regulations under the Act on the Aggravated Punishment of Specific Economic Crimes). From March 2021 to May last year, they are accused of receiving deposits of about 51.5 billion Terra coins from many people by promising to guarantee the principal and pay 19.56% interest when Terra coins were deposited in the Anchor Protocol (violation of the Act on the Regulation of Conducting Fund-Raising Business Without Permission, also known as the Similar Receipt of Funds Act).

Shin is also charged with illegally leaking 170 million Chai Pay payment information records over three years to make it appear that the Terra blockchain was used in Chai Pay, which uses a general payment method (violation of the Electronic Financial Transactions Act). Although the leaked payment information was merely replicated on the Terra blockchain, it was falsely promoted as if Terra blockchain technology was used in Chai Pay to reduce fees and generate profits.

Shin is also accused of separately promoting the 'Chai Project,' which he advocated, and defrauding 122.1 billion KRW from investors through false promotion and transaction manipulation in a 'series investment' method involving Chai convertible preferred shares (fraudulent unfair trade under the Act on the Aggravated Punishment of Specific Economic Crimes). It is known that a significant portion of the damages involved public funds, including those from the Ministry of Employment and Labor and the Korea Federation of Small and Medium Business. Shin is also charged with breach of trust and embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes, violation of the Act on Reporting and Using Specified Financial Transaction Information, mediation of breach of trust, and breach of duty.

Meanwhile, Shin’s side stated that the prosecution’s specific charges differ significantly from objective facts and that they intend to fully explain their position in court.

Shin’s lawyer said, "The prosecution’s charges stem from misunderstandings and lack of understanding of startups and the cryptocurrency market," adding, "Shin started with the purpose of reducing excessively high credit card fees through blockchain-based payment technology to benefit consumers. At that time, there was no policy from financial authorities stating that such a payment system was impossible. It is unreasonable and unfair to condemn the post-facto Luna crash as if it was impossible from the start of the business."

He continued, "At the time of Terra and Luna’s launch, financial authorities maintained the position that virtual assets were not securities, so even if they wanted to file a securities issuance report, they could not. Now, to retroactively punish for issuing securities without reporting is contrary to the principle of legality."