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Do Kwon Released on Bail, LUNC Community Hopeful of Terra Classic Revival

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Here are updates from the first court hearing of the travel documents forgery case against the pair of Terraform Labs' executives, Kwon and Han Chong-joon, arrested in March while attempting to flee Montenegro.

Also, more on latest developments around Terra Classic blockchain which was dealt a major blow when the ecosystem crashed a dozen months ago:

Detained Terraform Labs executives to be held under house held after first court hearing

Friday reports from local press in Montenegro indicate that Terraform Labs co-founder Do Kwon is set to be released from jail pending trial following his arrest at the country's main airport in Podgorica in March. Kwon was arrested alongside an associate and detained in the capital of Montenegro by authorities who alleged in an official statement that he was attempting to flee the country using falsified travel documents.

Do Kwon denies the travel document forgery charges

Kwon and his associate appeared before the Basic Court in Podgorica on Thursday, pleading not guilty to the charges against them. Branko Andjelic, the Podgorica-based attorney representing the South Korean nationals, advanced a release on a house arrest proposition with a bail amount of €400,000 ($437,000) for each of Kwon and Chang-joon. Prosecutor Haris Sabotic objected to the suggestion, contending that the two have abundant financial resources but a complete lack of interest in remaining in Montenegro. Kwon promised to comply with all requirements, adding that he would have provided a more comprehensive breakdown of his assets (most of which are volatile and liquid) and even divulged his account numbers had it not been for the presence of the media within the courtroom.

Local news site Pobjeda reported today that the court agreed to the request, which will see the disgraced crypto executive move into house arrest once the bail is posted. Terraform Labs' former chief financial officer, Chong-joon, who was taken into custody, will also be released for a similar bail – both against the prosecutor's wishes. The terms spelt in the Friday notice, however, prohibit them from leaving the capital. The court hearing for the case will resume on June 16 if no parties challenge the court statement.

Prosecutor leading the joint financial crimes team investigating Terra believes Kwon should be charged in South Korea

Meanwhile, South Korean prosecutors have maintained their pursuit for an outcome that entails getting Terra co-founder Kwon Do-Hyung back home and charging him for several violations concerning the collapse of his $40 billion crypto empire. Potential charges will have a different course to those of allegedly using fake Belgian and Costa Rican travel documents. Authorities in both the US and South Korea jurisdiction sought to extradite the former crypto executive – requests that counterparts in Montenegro acknowledged but dismissed. The South Korean prosecutor leading a joint investigation into the Terra crash, Dan Sung-han, believes his country is best positioned to bring justice.

The Wall Street Journal cited Sung-han in a May 5 report as he presented that Kwon’s scheme to defraud investors had most of its accomplices in the East Asian country. Sung-han said that Seoul Southern District’s joint financial crimes team has gathered extensive evidence pertaining to the case, which would be better handled domestically. Nonetheless, the South Korean prosecutor agreed that the priority is ensuring justice is served. The start of extradition proceedings for Kwon hinges upon the legal proceedings concerning his forgery allegations – Sung-han contends this process might yet be protracted should Kwon persist in lodging appeals. The lead prosecutor noted that in the event of a conviction, the Terra co-founder would potentially face the longest penalty for a financial offense in South Korean history, getting at least 40 years in jail.

Case against Terra co-founder Daniel Shin set to start on May 26

In the last week of April, ten individuals, including Terraform Labs co-founder Shin Hyun-seung, were named in indictments in South Korea. Several charges were levied against them then, including fraud, contraventions of capital-market regulations, and violations of electronic financial transactions and fundraising activities. Local news agency Yonhap revealed by this week that the first trial of Daniel Shin and his co-defendants will be held in the Seoul Southern District Court on May 26. The prosecutor's office has claimed that individuals associated with Terraform Labs garnered a minimum of 462.9 billion won ($346 million) in profits by liquidating their crypto prior to the Terra breakdown.

Shin has enlisted a group of 30 solicitors to advocate on his behalf, including eleven lawyers affiliated with a law firm that has recently recruited a former Seoul prosecutor who played a key role in investigating the Terra-Luna collapse. During a press conference last month, lead prosecutor Sung-han asserted that Shin's alleged involvement in the financial fraud under investigation exceeded the scope of the former Terra CEO, Do Kwon. Nevertheless, despite concerted efforts by the prosecution, local courts have thus far remained unconvinced and rejected two requests for an arrest warrant for Shin. Shin's legal representatives have also persistently poured cold water on claims against him, emphasizing that at the time of Terra's inception, financial authorities in the country had not adopted a definitive stance on using crypto as a means of payment.

Court ordered the freezing of $186 million in assets

In Thursday's court appearance, Kwon was reticent about disclosing his assets, only revealing that he and his wife jointly own a residence in Seoul, approximately valued at €3 million. Earlier this week, local news outlet Hankyung reported that Chief Judge Yun Chan-Young of the 12th Criminal Division of the Seoul Southern District Court ordered the freezing of a substantial sum of 246.8 billion won (about $184.7 million) in assets belonging to the parties indicted last month. It also barred Kwon from disposing of his financial resources, spanning securities (Mirae Asset Daewoo), bank deposits (Woori Bank), and even crypto held in personal accounts on various virtual digital asset exchanges.

While prosecutors look to bring justice, the community behind the original Terra ecosystem has moved on with intentions of reinstituting the blockchain's status. Combined efforts from the established task force, development teams, market makers and other community members have helped keep the one-time billion-dollar worth project relevant. The recently-concluded upgrade of the Terra Classic rebel-2 testnet to version 2.0.0 was a testament to the continued commitment to restoring the project.

Terra Classic testnet successfully upgraded to v2.0.0

The L1JTF team, comprised of seasoned developers, blockchain specialists, and passionate community members dedicated to the Terra Classic network, confirmed that the milestone was achieved on May 4. Six validators participated in the upgrade process, including StakeBin, Lunanauts, and AllnodeS. The v2.0.0 upgrade of the L1JTF testnet, with Cosmos SDK v0.45, represents a crucial phase as Luna Classic pursues a full recovery – introduces a range of novel features aimed at augmenting functionality and bolstering security.

The community positively embraced it, recognizing its potential to propel the Terra Classic mainnet upgrade to v2.0.0.  Though the majority has been supportive, some members have expressed concern regarding the limited number of validators involved in the development process. They argued that the participation should have extended to 30 validators, ensuring a broader representation. Also, Professor Edward Kim, who had departed from L1JTF to pursue his artificial intelligence chain project, reportedly emerged as a supporter of the testing process.

Mainnet upgrade proposal

This week, the Project Manager of the L1 Team, LuncBurnArmy, submitted a proposal for the core mainnet software upgrade of Terra Classic to version 2.0.1, marking the next phase of advancement for the network. The submission, if approved, is scheduled to come into effect on May 17 at 14:03 UTC.  This upgrade encompasses a transition to Cosmos SDK v0.45.13 Columbus-5 and Tendermint v0.34.24. Adjustments will also be made to the minimum initial deposit required for governance proposals, and the project’s code maintainability will be enhanced to improve the network's governance framework. The Cosmwasm 1.1.0 Parity upgrade will come after. Scheduled for May 31, the release will unlock the Terra Classic blockchain for builders and projects in the Cosmos and Terra 2.0 ecosystems.

DFLunc comes in to boost LUNC burns as the Luna Classic's campaign to recovery dwindles

Cutting down the bloated supply of LUNC tokens left post-implosion in an optimal fashion has proved the biggest hurdle in the way of the ecosystem's revival. Binance, the world's largest crypto exchange, has thus far led efforts to regulate LUNC’s circulating supply. Terra Finder data showed that Binance burned 1.27 billion LUNC on May 1 at 15:13 UTC, using a fee of 2.53 million LUNC. Since the inception of the first burn mechanism, the crypto exchange has expunged 31.83 billion LUNC in spot and margin trading fees.

The drop in the rate at which Binance burns LUNC tokens can be attributed to a decline in both spot and market trading volume in April. The exchange’s switch to burning only 50% of the LUNC spot and margin trading fees starting last December, as opposed to the previous 100% burn rate, hasn’t helped sentiment amidst the general downturn in contributions to the LUNC burn campaign.

On-chain data shows that DFLunc Protocol, a Terra Classic validator launched on Terra Classic in April, has recently risen to the top of the list among entities burning LUNC. Users can only mint the platform’s DFC token by burning LUNC paying USTC as protocol fees. Based on two CosmWasm contracts, DFLunc and CW20-DFC, the project burned in excess of 1.5 billion tokens at the start of the month. To date, more than 57.3 billion LUNC has been destroyed, leaving a still-colossal circulating supply of about 5.88 trillion LUNC tokens.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.