South Korea Slams Terra’s Do Kwon With $78M Fine for Tax Evasion: Report

According to reports, the National Tax Service of South Korea has imposed a 100 billion won ($78 million) fine for tax evasion penalties on Terraform Labs, its co-founder Do Kwon, and other officials.

The Genesis

Local news sources claim that the tax authority first started looking into Terraform Labs and its affiliates in June of last year on the grounds of possible corporation and income tax cheating.

Two of the company’s subsidiaries were discovered to have foreign registrations in Singapore and the Virgin Islands. Even though the entities were registered abroad, the actual management of the businesses was done in South Korea.

Corporate tax regulations in the nation consider businesses with overseas registrations as local ones if their management and operations are carried out there. As a result, subsidiaries of Terraform Labs are obligated by law to pay taxes to the Korean government.

The tax authorities imposed a penalties of 44.7 billion won ($34.7 million) in corporate tax and 4.66 billion won ($3.6 million) in income tax on Terra’s Virgin Islands subsidiary in October.

Tax agency launches probes into suspected tax evasion

The tax agency of South Korea announced on Tuesday that it has started looking into possible tax evasion by 59 individuals who are accused of keeping unlawful profits or improperly accumulating wealth.

According to the National Tax Service, 29 of them used business funds to purchase luxury items while earning money in an illegal or dishonest manner (NTS).

The government also took action against people and organizations that increased the assets of pandemic-affected merchants and individuals by causing harm to them.

Since last year, the NTS has successfully recovered outstanding taxes from high-income tax evaders and individuals who made money by extorting vulnerable people totaling 153 billion won ($130 million). Similar tax investigations have been ongoing since May.

Albright Capital voluntarily drops lawsuit against Do Kwon, Terraform Labs

The failing Terraform Labs and its executives, including Do Kwon, were accused of fraud by the investment firm Albright Capital, but the allegations have been voluntarily dropped.

Albright Capital and the legal team Scott +Scott, Braga Eagle & Squire independently brought class actions against Terraform Labs after the famous Terra collapse in May 2022.

Albright Capital claimed in its lawsuit that Terraform Labs had promoted the UST, Terra (LUNA), and associated Terra cryptocurrencies in a misleading manner.

Additionally, officials at Terraform Labs, notably Do Kwon, were charged with stealing money from the Terra ecosystem for their own benefit.

Albright Capital has, however, requested that the class action lawsuit against Terraform Labs and Do Kwon be voluntarily dismissed without prejudice, according to a document filed on January 9.

The dismissal request also names Nicholas Platies, Jose Macedon, Kanab Kaiya, and Remi Teton as defendants in addition to Luna Foundation Guard, Delphi Digital, Jump Trading, and Nicholas Foundation Guard.


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