South Korea Drops Arrest Warrant for Terra Co-Founder Daniel Shin

A South Korean court has dropped an arrest warrant for a less well-known Terraform Labs co-founder, Daniel Shin.

“Considering the attitude toward the investigation, the circumstances, process and contents of the statement, it is difficult to see that there is a risk of destroying evidence or escaping beyond the scope of exercising the right to legitimate defense,” said Hong Jin-pyo, a judge in charge of warrants for the Seoul Southern District Court.

Hong Jin-Pyo also oversaw dismissal of arrest warrants for three early investors and four developers associated with Terraform Labs. Key Terraform Lab employees remaining in South Korea are banned from leaving.

An arrest warrant for Do Kwon is still outstanding. Authorities allege that he committed violations of the Capital Markets Act, fraud, and money laundering.

Do Kwon initially stayed in Singapore. Then, after South Korea got Interpol involved and authorities started to close in on him, he fled to an unknown location in Dubai. Some unconfirmed reports indicate that he may be somewhere in Europe. He claimed that he wasn’t on the run and was cooperating with authorities. He denies any wrongdoing in the case and taunted authorities in a Twitter thread, offering a meetup.

South Korea revoked Do Kwon’s passport, meaning that he can’t legally travel to other countries. “Europe” is a rather vague location but may simply mean that Interpol and local authorities don’t want to tip off Do Kwon by pinning it down to a specific country. Dubai could have simply been a temporary stopping point before he fled to somewhere outside the United Arab Emirates.

Terraform Labs’ algorithmic stablecoin, Terra (UST), lost its peg and collapsed in May. Although Terraform Labs promised to prop it up by burning more than 1.3 billion UST, it was not enough to save the stablecoin and its counter-coin, LUNA.

Investors lost $60 billion in the collapse. It triggered a chain of events that led to the bankruptcies of Celsius Network, Voyager Digital, and Three Arrows Capital. Voyager Digital is still trying to close a sale of its assets as part of bankruptcy proceedings after FTX declared bankruptcy itself and backed out of an acquisition deal. Celsius Network is still liquidating assets, most recently selling the self-custody platform GK8 to Galaxy Digital. Three Arrows Capital’s founders have reportedly failed to cooperate with liquidators, who recently seized $35.6 million from its Singaporean bank accounts and liquidated $2.8 million in digital assets and NFTs owned by Three Arrows Capital.

An attempt to reboot Terra with a new blockchain and airdrop for token holders flopped. Terra Classic (LUNC) is trading at less than two hundredths of a cent. TerraClassicUSD (USTC) is trading at just above $0.02. The original token using the LUNA ticker symbol is still somehow trading at $1.67.

The aftermath of the Terra/LUNA meltdown was the beginning of a bad time for crypto in general. Already fragile crypto markets dropped even farther. Authorities have not yet caught up with Do Kwon even as former pharmaceutical company boss Martin Shkreli, AKA the much-hated “Pharma Bro,” aimed a quip at Kwon, saying that “jail isn’t so bad.” Kwon apparently didn’t find that very funny.

South Korea has now dropped arrest warrants against several former investors and developers for Terraform Labs, including co-founder Daniel Shin. The move could be seen as paving the way for their cooperation in the investigation into what happened in the leadup to Terra’s meltdown, considering that the judge in charge of warrants seemed unworried about destruction of evidence or having more fugitive founders on South Korea’s hands.