South Korean Agency Fines Terraform Labs for Tax Evasion

The saga with Terraform Labs and its Co-Founder, Do Kwon keeps hitting the wires. A recent report unveiled that South Korea’s National Tax Service (NTS) has imposed a 100 billion won ($78 million) fine on Terraform Labs and Do Kwon for alleged tax evasion.

According to Naver News, Do Kwon has been dissatisfied with the domestic taxation system since December last year. In the days before the LUNA crash, it was confirmed that he was trying to liquidate a domestic corporation and relocate abroad, which raised suspicions that he was evading taxes. The NTS notified Do Kwon, Shin Hyun-seong, the Chairman of the Board of Ticket Monster, Han Chang-joon, the CEO of Chai Corporation, and Terraform Labs to pay 100 billion won in taxes.

During a special tax investigation conducted by the National Tax Service in June last year, The Ancore Company and Terraform Labs, Terraform Labs’ parents, were accused of evading corporate and income taxes. Do Kwon owns 92% of Terra Singapore, a subsidiary of Terraform Labs, according to the tax investigation. Shin, who claimed to have no affiliation with Terraform Labs, was found to have an 8% stake. Additionally, the registered director was appointed to the Board of Directors by the CEO.

Despite Terraform Labs being based in a foreign country, the National Tax Service decided to collect taxes on charges of evasion from the company because they saw these companies as domestic corporations. Even though Singapore and the Virgin Islands are registered corporations, the ‘place of actual management’ is judged to be an important factor in determining whether a corporation is a domestic one.

Investigations on Domestic Crypto Exchanges

The South Korean financial authorities have recently begun inspecting cryptocurrency exchanges. LUNA, TerraUSD's sister coin, plunged after its price collapsed, causing investors to suffer massive losses.

Recently, the Financial Services Commission and the Financial Supervisory Service (FSS) asked local cryptocurrency exchange operators to provide information on transactions related to TerraUSD and LUNA, including volumes of trading, closing prices and investor participation.