Terraform Labs, organization behind the Terra (LUNA), owes South Korea $78.5 million in taxes

Terraform Labs and its co-founder Do Kwon  responsible for the Terra ecosystem – continue to face legal problems following the collapse of LUNA and the stablecoin UST. According to a report published on the South Korean portal Naver News, South Korea’s national tax agency fined Terraform Labs and its co-founder about 100 billion won (or $78 million). ) on charges of tax evasion.

The news comes shortly after Do Kwon is summoned to attend a hearing at the South Korean Congress. He was “summoned” to clarify the demise of the Terra network, LUNA and the TerraUSD (UST) stablecoin.

Investigations and fines against Terraform Labs

According to reportage, Do Kwon was charged with tax evasion for failing to pay corporate tax. Furthermore, the agency said he had been “displeased” with the country’s fiscal policies since December 2021. Hence, he planned to liquidate Terra’s domestic operations and move out of the country.

The decision raised suspicions among many, especially the tax authorities. After all, it was understood as a tactic to avoid paying taxes.

The report also says that in June of last year, the National Tax Service, one of South Korea’s tax organizations, conducted an investigation against Terraform Labs. Likewise, the organization was accused of corporate and income tax evasion.

In the tax investigation, it was confirmed that Do Kwon owned a 92% stake in Terra Singapore. It is an arm of Terraform Labs in Singapore.

Other investigations and fines

In October 2021, the National Tax Service also announced an investigation into the group. At the time, it imposed an income tax penalty of 4.66 billion won ($3.6 million) on Terra Virgin, Terra’s subsidiary in the Virgin Islands.

The tax service also discovered that Do Kwon sent LUNA free of charge from Terra Singapore to the LUNA Foundation Guard (LFG). The goal was also to avoid taxes or offset losses from the Anchor protocol.

“The reason the National Tax Service decided to collect taxes from Terraform Labs, which was established abroad, on the evasion charge, is because these companies were considered national companies,” the report says.

Finally, the report says that Do Kwon tried to flee the country and liquidate the company just days before LUNA’s collapse. But the attempt failed and Do Kwon continues trying to recover the project.

South Korea revives financial crimes unit to investigate Terra

A report by SBS News further reported that a group made up of promoters and officials from the Financial Services Commission and the Financial Oversight Service will investigate the methods used by Terraform Labs to attract investors.

The financial crime fighting unit will resume after being discontinued two years ago.

A prosecutor’s official explained that the Luna-Terra case is a case of multiple harms to ordinary people. Therefore, it was designated as the unit’s first investigation case after an internal review by the Ministry of Justice.