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Key Insights:

  • Shocking chat history reveals Terra founder’s deceptive plans for fake transactions.
  • Investors misled as Chai payments masked as on Terra blockchain.
  • Legal battles loom as SEC seeks extradition in Terra blockchain scandal.

The U.S. Securities and Exchange Commission (SEC) has brought to light a series of leaked chat conversations between Do Kwon, the founder of the Terra blockchain that collapsed in 2022, and Daniel Shin, the CEO of the Chai payment app. These confidential messages, dating as far back as 2019, have unveiled a disconcerting plan involving fake transactions to generate fees and mislead investors. This revelation has sent shockwaves through the cryptocurrency community and raised fundamental questions about the integrity of certain blockchain projects.

Deceptive Strategies Uncovered

The leaked chat history between Do Kwon and Daniel Shin paints a disturbing picture of potential misconduct within the Terra blockchain project. Allegedly, Do Kwon suggested the creation of fake transactions to generate fees during the project’s developmental stages. In response to Shin’s concerns about the credibility of such transactions, Do Kwon cryptically asserted, 

“I will make it indiscernible. I won’t tell if you won’t.” 

After a series of exchanges, Shin reluctantly agreed to experiment with this dubious strategy on a smaller scale.

According to the SEC, Terraform Labs, the entity behind the Terra blockchain, collaborated with Chai in 2019 with the aim of settling transactions on-chain. However, despite this partnership, traditional Chai payments continued as usual, while counterfeit Chai transactions were generated on the Terraform blockchain. The intention was to create the illusion that Chai payments were genuinely utilizing the Terra blockchain, effectively deceiving investors.

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Investor Trust Betrayed

As a direct consequence of this deceptive maneuver, investors allegedly purchased hundreds of millions of LUNA and other tokens, wrongly believing that Chai transactions were authentically integrated with the Terra blockchain. The repercussions of this manipulation are still unfolding, as trust in blockchain projects and the regulatory framework surrounding them becomes deeply shaken.

Since these revelations came to light, Do Kwon’s legal predicament has escalated rapidly. He was apprehended in Montenegro and sentenced to prison for forging travel documents. The SEC has submitted an extradition request to the United States, where Do Kwon faces charges linked to the deceptive practices disclosed in the leaked chat history. Yet, Do Kwon’s defense attorneys assert that extradition is an unfeasible prospect, further muddling the legal proceedings.

Terraform Labs and Chai Partnership

The Terraform Labs and Chai partnership in 2019 sought to enhance Terra’s payment capabilities significantly. Terraform Labs announced their intention to revamp the payment infrastructure on the Terra blockchain, offering discounted transaction fees to merchants. Furthermore, the integration of Terra’s Korean won-pegged stablecoin, KRT, into the Chai payment app was a pivotal objective of this collaboration. Despite their ambitious goals, Terraform Labs and Chai terminated their partnership in 2020.

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Tom Blitzer

By Tom Blitzer

Tom Blitzer is an accomplished journalist with years of experience in news reporting and analysis. He has a talent for uncovering the key elements of a story and delivering them in a clear and concise manner. His articles are insightful, informative, and engaging, providing readers with a nuanced understanding of complex issues. Tom's dedication to his craft and commitment to accuracy have made him a respected voice in the world of journalism.