South Korean watchdog allegedly fined Terraform Labs $78 million for tax evasion

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Terraform Labs and co-founder Do Kwon continue to attract more legal issues following the collapse of the Terra ecosystem. After initial reports of a possible congressional hearing and an investigation by the Grim Reapers Financial Crimes Unit, the crypto company has now slipped under the radar of the state tax agency.

According to a report in Naver News, South Korea’s national tax agency fined Terraform Labs and its co-founder $78 million, or 100 billion won, for tax evasion.

The report pointed out that the Kwon had been unhappy with the taxation of crypto in the country since last December and tried to liquidate Terra’s domestic operations just before the infamous Terra (LUNA) crash.

Terraform Labs was reportedly first under the radar of tax authorities in June last year on suspicion of evading corporate and income tax. Investigation of Terraform Labs and its various subsidiaries revealed that the company was registered in the Virgin Islands as well as Singapore.

Related: Analysts assess the consequences of the collapse of Terra (LUNA)

Although both subsidiaries were registered overseas, the “place of effective management” was South Korea itself. According to Korean corporate tax law, the place of effective management is considered for tax purposes more than the registered country.

Tax authorities were alerted after Terraform Labs sent LUNA from Terra Singapore to LUNA Foundation Guard (LFG) to avoid taxes or compensate for anchor protocol losses.

Earlier in October, Terra subsidiaries in the Virgin Islands were fined $3.6 million, or 4.66 billion won, in income tax and $34.7 million, or 44.7 billion won, in corporate tax.

South Korean law enforcement and policymakers heavily criticized Do Kwon and his associates following the LUNA crash. A special financial crime investigation unit called Grim Reapers of Yeouido was called back after 2.5 years to investigate the scheme.


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