South Korea’s National Tax Service has fined Terra’s co-founder Do Kwon as tax evasion penalties. He will reportedly pay 100 billion won ($78 million) for the tax offense. Local reports reveal that the tax agency started investigating Terraform Labs and its subsidiaries last June on suspicion of income and corporate tax evasion.
Terraform Labs Is Licensed Abroad But Operates In South Korea
Following the investigation, it was discovered that two of the firm’s subsidiaries were registered abroad in Singapore and the Virgin Islands. Although both companies were licensed abroad, their operational bases are in South Korea.
The country treats foreign-registered companies as domestic firms when the operations and management of the firms are carried out in South Korea. As a result, all the tax laws for domestically registered companies are also applicable to such companies. This means Terraform Labs’ subsidiaries are required by law to fulfill all tax obligations to the Korean government.
The Korean authorities have ordered the company’s Virgin Islands subsidiary to pay a penalty of 4.6 billion won ($3.6 million) in income tax and 44.7 billion won ($34.7 million) in corporate tax.
Do Kwon has shown repeated dissatisfaction with the domestic tax system and was trying to liquidate a domestic company and relocate abroad a few days before the LUNA crash.
Do Kwon Now Has More Issues To Worry About
The tax evasion issue is coming at the period the South Korean National Assembly wants to summon him over the recent crash of the TerraLUNA stablecoins. The stablecoin has lost nearly all its values in an unprecedented event that has sent shock waves across the entire crypto space.
24 hours before the South Korean tax authorities fined Kwon, some Korean investors filed a criminal and civil lawsuit against him about the massive loss they suffered from the collapse of LUNA and its sister coin TerraUSD. The report showed that over 200,000 South Korean investors lost their money due to the collapse of the stablecoins.
Additionally, another Korean group, known as “Victims of Luna, UST coins” is planning to file a class-action suit against Terra co-founders Shin Hyun-Seong and Do Kwon for fraud and illegal crowdfunding.