The US Securities and Exchange Commission (SEC) has alleged in an updated complaint against Do Kwon that the Terraform Labs founder conducted fake transactions for affiliated payments platform Chai.
According to the regulator, the heads of the two companies misled investors by showing payments were made on the Terra blockchain. In fact, the regulator has said the transactions were settled "through traditional means."
The SEC has attached as evidence a screenshot of Kwon's correspondence with another Terraform co-founder, Daniel Shin. The latter created and ran the payments platform.
The then-CEO of Terraform Labs said in the emails:
"I can create fake transactions on the Terra blockchain, which would appear real and generate fees. It is possible that this will decrease as Chai grows."
Shin responded by expressing concern that users would become aware of fraudulent transactions.
Terraform Labs CEO Chris Amani has dismissed the text on X:
This has nothing to do with Chai and isn't damning.
— Chris Amani | Terra (@fleece_cannon) September 29, 2023
This was a private conversation, (albeit an inelegant one) about the need to boostrap validators to ensure the security of the chain. In many cosmos chains today, that is done through inflationary rewards.
Terra relied only on… https://t.co/IzBXinwmf9
In fact, when you have the context for the conversation, you can see that Do is saying that as chai ramps up volume on Terra, those fees will soon eliminate the need for the subsidies. Just more confirmation that Chai used the blockchain.
— Chris Amani | Terra (@fleece_cannon) September 29, 2023