S Korean Financial Regulator Says it Warned Terraform Co-founders of Danger Back in 2018

South Korean financial regulators say they warned the Terraform Labs co-founders Do Kwon and Daniel Shin against launching their business back in 2018 – but were ignored.

Per YTN, the Financial Supervisory Service (FSS), one of the nation’s top regulators, said it first spoke to Terraform in 2018. Terraform executives reportedly asked the FSS whether they should register their new “cryptoasset payment business” as an “electronic financial business” or a “payment business.”

But the FSS replied that cryptoasset-powered solutions “cannot be registered as a payment business in any form, as cryptoassets are not a legal form of payment.”

The FSS then went on to “warn” the Terraform bosses Kwon and Shin “several times” about the company’s business model – both again in 2018 and then in 2019. But the FSS said Terraform instead chose to “ignore the opinion of the financial authorities,” in the broadcaster KBS’ words.

Did Financial Regulator Really ‘Warn’ Terraform Co-founders in 2018?

YTN added that the Seoul Southern District Prosecutor’s Office’s Financial and Securities Crime Joint Investigation Team has also been informed of the FSS’ stance – and its conversations with Terraform.

As such, the prosecution team is investigating whether it can press fraud charges against both Kwon and Shin. It suspects both of willingly ignoring “warnings” and “deceiving” customers.

An arrest warrant has already been issued for Kwon, who is thought to have fled to Europe – despite his claims that he is “not on the run.”

Shin remains in South Korea, however. His legal team appears to have hinted that the precise “meaning” of the FSS’ “warning” was “not clear” – and that it did not appear to him that the FSS had told Terraform “not to proceed with the business.”

Prosecutors have already summoned Shin for questioning on three occasions, but are now “set to decide” whether they will ask a court to issue an arrest warrant.