TechFlow news — On September 30, court documents from the SEC revealed that Do Kwon has (almost) admitted to fabricating trading volume. The SEC filing includes text messages between Do Kwon and Daniel Shin, founder of the payment app Chai (and also co-founder of Terraform Labs), with the following excerpts:
Do Kwon: "I can create fake transactions that look real, and these will generate fees."
Daniel Shin: "What if people find out they're fake?"
Do Kwon: "Then I won't tell you about it."
It is reported that in 2019, Terra announced a partnership with Chai, stating in a blog post that the collaboration aimed to rebuild the payment stack on blockchain to streamline legacy payment systems and offer merchants discounted transaction fees. The partnership was expected to result in the Terra network processing "millions or even billions of transactions."
The SEC alleged in its complaint that Chai payments did not actually use the Terraform blockchain for processing and settlement. Instead, the defendants deceptively copied Chai payment data onto the Terraform blockchain to make them appear as if they occurred on-chain, while in reality, Chai payments were processed through traditional methods. In the early stages of the Chai-Terraform collaboration, Kwon and Daniel Shin had a private conversation in which Do Kwon detailed his plan to leverage Chai to generate fake transactions on the Terra blockchain—transactions that would appear legitimate and generate fees.
