Do Kwon, one of the co-founders of Terraform Labs, has challenged the significance of Slack messages that were presented as evidence. These messages revolved around discussions he had with his co-founder, Daniel Shin, regarding potential strategies to attract investors by manipulating transactions.
The United States Securities and Exchange Commission (SEC) included a Slack conversation between Kwon and Shin, dated back to September 2019, in a recent court filing.
Slack message report between Do Kwon and Daniel Shin. Source: Docdroid
This conversation suggested that Kwon and Shin were actively brainstorming ways to generate investor interest in Chai Corporation, a payment provider based in Seoul, which was co-founded by Kwon and Shin in mid-2019. Notably, Chai Corporation had shared offices and staff with Terraform until the two companies separated in 2020.
According to the leaked message exchange, Kwon intended to shape transactions to make them more attractive:
“I can just create fake transactions that look real.”
Kwon went on to explain that these transactions would yield fees and could gradually be phased out as Chai Corporation expanded. He also seemed to propose a pact with Shin to maintain the confidentiality of their plan, stating, “I won’t tell if you won’t.” Kwon emphasized the difficulty investors would face in detecting these manipulation tactics, stating,
“All the power to those that can prove it’s fake,” and expressing his determination to keep the scheme hidden: “Because I will try my best to make it indiscernible.”
Slack conversation between Do Kwon and Daniel Shin on 5/9/2019. Source: Docdroid
However, Kwon refutes the allegations against him, claiming that the evidence was taken out of context. His legal team argues that Kwon and Shin were discussing the possibility of staking LUNA tokens with validators rather than creating counterfeit Chai transactions.
They stated, “Finally, the SEC misstates evidence in its gratuitous effort to prejudice Mr. Kwon in a procedural motion having nothing to do with the merits (or lack of merit) of the SEC’s case.”
Kwon’s lawyers added that the SEC’s motion relies on misrepresentations about irrelevant evidence to support its baseless claim that it has been unable to obtain discovery from Mr. Kwon.
Meanwhile, Kwon’s legal team is actively advocating for the US federal court to reject the SEC’s extradition request, citing its impossibility due to Kwon’s detention in Montenegro with no scheduled release date, following his conviction for passport fraud. This extradition request pertains to the Terra ecosystem’s collapse.