The Terra co-founder now has more things to worry about as he faces a $78 million fine for tax evasion.
According to reports, the National Tax Service of South Korea has imposed a 100 billion won ($78 million) punishment for tax evasion penalties on Terraform Labs, its co-founder Do Kwon, and other officials.
Local news sources claim that the tax authority initially started looking into Terraform Labs and its affiliates in June of last year on the grounds of possible corporation and income tax cheating.
Two of the company’s subsidiaries were discovered to have foreign registrations in Singapore and the Virgin Islands. Even though the corporations were registered abroad, the actual administration of the businesses was done in South Korea.
Corporate tax regulations in the nation consider businesses with overseas registrations as local ones if their management and activities are carried out there. As a result, subsidiaries of Terraform Labs are obligated by law to pay taxes to the Korean government.
The tax authorities imposed a penalty of 44.7 billion won ($34.7 million) in corporation tax and 4.66 billion won ($3.6 million) in income tax on Terra’s Virgin Islands subsidiary in October.
Suspected Tax Evasion by the Korean Tax Agency
The article claims that in December of last year, Do Kwon expressed dissatisfaction with the country’s tax laws. Just before the devastating Terra LUNA accident earlier this month, he attempted to close down the company’s local offices and relocate abroad.
Terraform Labs delivered LUNA Terra Singapore to the LUNA Foundation Guard (LFG) during the UST incident, maybe in an effort to make up for the losses anchor protocol incurred. The report also stated that the tax authorities saw the action as unusual, leading them to suspect that the corporation was attempting to dodge taxes.
Do Kwon is facing other lawsuits
Less than 24 hours after news broke those Korean investors had sued Do Kwon in both civil and criminal court, the $78 million tax fine was levied. As previously mentioned, investors UST and LUNA also want the court to take Kwon’s property.
Do Kwon and Shin Hyun-Seong, co-founders of Terra, are also the targets of a class action lawsuit for fraud and unlawful crowdfunding from a different Korean organization named “Victims of Luna, UST Coins.”
Kwon Says Shutting Down Terraform Labs Korea Was “Coincidental”
Just a few days before the ecosystem’s catastrophic collapse, Kwon disbanded the Terraform Labs Korea firm, according to recent court records.
The project’s management unanimously decided to terminate its Seoul and Busan headquarters on May 4 and May 6, during a general shareholder meeting on April 30.
It’s interesting to note that this was also the period when UST started their depeg, which set off a domino effect that destroyed over $26 billion from the stablecoins market, destroyed the value of LUNA, and left investors with significant unrealized losses. The similarity between these two occurrences had sparked theories concerning the Terra collapse.
However, Do Kwon stated in a recent tweet that the coincidence of both occurrences was “purely accidental.” He stated:
“I’ve been in Singapore since last December – this is a personal decision and has long been planned. I’ve been open about being located in Singapore across multiple interviews and podcasts. Shutting down a company just takes some time, and timing is purely coincidental.”
Terra Witness Skips Official Inquiry, Cites ‘Extreme Stress’ and ‘Panic Disorder’
In subsequent parliamentary hearings, a number of witnesses were missing because South Korean authorities are still looking into the Terra collapse.
According to a local news source on Monday, Kim Seo-joon, CEO of venture capital company Hashed and an early investor in Terra, failed to show up as a witness before a session of the Korean National Assembly’s Political Affairs Committee.Six witnesses, including Seo-joon, were called in order to better understand the events that led to Terra’s $40 billion collapse in May.
“After the Luna-Terra event, I was under severe stress, my health deteriorated, and I needed to stabilize,” he said in a statement. Additionally, the letter asserts that Seo-joon has “anxiety” and “panic disorder.”
A medical certification that he has been undergoing mental therapy since July 29 and that he “is in severe need of emotional stability at this time” was appended. The certification also said that the medication and counseling regimen had put him under further stress.
On March 14, the Political Affairs Committee chose important figures such as Kim Seo-joon, Shin Hyun-sung, director of Chai Holdco, Lee Jung-hoon, a former chairman of Bithumb Korea, as well as large Bithumb shareholders Kang Jong-hyun and CEO of Dunamu Lee Seok-woo.
In addition, Lee Jung-hoon provided an explanation for his absence from the National Assembly meeting on June 6 in a statement that he filed.
The former Bithumb CEO said he no longer had any involvement in the company’s operations and cited panic disorder as the cause.