South Korean prosecutors have reportedly uncovered evidence of an obscure Terraform Labs subsidiary that appears to exist only “on paper.”
Terraform, the company behind the LUNAC token, the UST stablecoin, and the new LUNA coin, shuttered its South Korean businesses back in April. But per an exclusive TV news report from the South Korean national broadcaster KBS, prosecutors have found information about a firm named FLEXE Corporation.
Documents filed by the company appear to list Do Kwon, the CEO of Terraform Labs, as FLEXE’s sole executive director. The documents also appear to show that the company is still operational.
A search on Naver, South Korea’s answer to Google, appears to indicate that a firm named FLEXE Corporation is based in the Seocho District of Seoul, in the same building as a company that helped fund Terraform’s foundation.
A KBS reporter visited the address listed as FLEXE Corporation headquarters in the documents. But the reporter was told that there was no such company in the building. A building manager told the reporter that they had never heard of FLEXE Corporation, and that they could find no record of a FLEXE Corporation ever having occupied a space in the building.
KBS explained that prosecutors were “closely” looking into “suspicious” flows of money through the company. It remarked that FLEXE was likely a so-called “paper company.”
In 2019, company records appear to indicate that payments of USD 4.5m and USD 9m were made from the Terraform HQ in Singapore to what appears to be a shell company in the Virgin Islands. The alleged shell company later made payments of USD 9 million to FLEXE and another firm.
An unnamed former Terra developer was quoted as stating that “the flow of money through FLEXE Corporation” had also been “an issue” during a special tax probe of Terraform conducted by the National Tax Service last year.
The media outlet added that the Seoul Southern District Prosecutor’s Office has ordered its Financial Investigation Department to join the Financial Crimes Unit’s existing probe into Terraform.
Exchanges call for listing standards that echo EU, US regulations
Meanwhile, South Korean exchanges have been keen to distance themselves from what politicians have called the “LUNAC/Terra incident.”
Listing and delisting policies have fallen under the spotlight in recent months, with many critical of the fact that exchanges failed to delist LUNAC in a coordinated manner. Some exchanges delisted the coin shortly after the May price drop, while others continued to trade in the coin for several weeks before finally announcing the end of LUNAC support in June.
The government has called on exchanges to create a self-regulating body that can make uniform decisions on delistings.
And Yonhap reported that the Korea Digital Asset Providers Association, a body that comprises a number of smaller domestic crypto exchanges, says that it has created a proposal to create an industry-wide “cryptoasset review committee.” This committee would be charged with deciding which coins could be listed and removed from domestic exchanges’ platforms.
The proposal suggests appointing a number of “external” experts to the committee, to ensure that its actions are impartial and are made in the public’s best interests. It also suggests building guidelines using crypto industry standards set out by EU and United States regulators.
The proposed committee would also be charged with “compliance monitoring,” as well as evaluating coins’ “sustainability” and “level of communication with investors.”
The proposal also includes provisions for monitoring unfair trading practices, such as market manipulation and insider trading.
The body said that adopting its proposal would help exchanges boost investor protection and provide more stable growth for the crypto industry.
Meanwhile, at 10:11 UTC on Friday morning, LUNA coin is trading at USD 1.83, up 6.6% in a day and down 16.5% in a week.