Luna’s crash led to a lot of trouble. Recently, The National Tax Agency of South Korea has accused Terraform Labs and its co-founder Do Kwon of tax evasion.
According to the South Korean Corporate Tax Act, a foreign company is still required to pay taxes to the country if it is domestically managed and this is exactly the case for Terra Labs. Although Terraform Labs was registered in the Virgin Islands as well as Singapore, it was still domestically managed. Even worse, Do Kwon reportedly tried to liquidate the company and leave the country before the collapse happened. As a result, both Do Kwon and Terraform Labs were fined approximately $78 million.
Investigations into Terraform Labs first began in June 2021. The investigation found that the company was registered in the Virgin Islands and Singapore. Following the investigation, its subsidiary Terra in the Virgin Islands was fined $3.6 million in income taxes and $34.7 million in corporate taxes in October.
The decision reportedly made Kwon unhappy with the taxing of cryptocurrencies in the country. As reported by Naver news, Kwon attempted to liquidate Terra’s domestic operations shortly before LUNA crashed. Tax authorities were alerted after Terraform Labs sent LUNA from Terra Singapore to LUNA Foundation Guard (LFG) to avoid taxes or cover anchor protocol losses.
With about 2.8 million South Koreans losing their savings and at least 8 committing suicide, Do Kwon was also invited to a Congressional hearing. The hearing hopes to help determine the cause of Luna’s collapse and the measures to protect investors. A special financial crime investigation unit named Death Yeouido has been revived after 2.5 years to investigate Do Kwon’s company.
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