Co-founder of Terraform Labs Daniel Shin, left, poses for a photo with Do Kwon, another co-CEO / Courtesy of Terraform Labs

Prosecutors said Monday they will bring in Daniel Shin, co-founder of Terraform Labs, for questioning over allegedly gaining illegal profits before the massive collapse of the blockchain firm's cryptocurrencies.

The Seoul Southern District Prosecutors Office said Shin will appear for questioning as a suspect this week. The 37-year-old is currently serving as the head of fintech firm Chai.

Terraform Labs has been under investigation for alleged fraud and tax evasion after investors in its cryptocurrencies ― TerraUSD and Luna ― filed complaints against Do Kwon, another co-CEO, in May. An Interpol red notice has been issued for Do.

Prosecutors suspect Shin stored Luna ― which had been pre-issued without notifying regular investors ― and pocketed illegal profits worth 140 billion won ($105 million) by selling the tokens at a high point.

While there is currently no legal clause on stablecoins and bitcoins under the Capital Markets Act, prosecutors said they view Luna cryptocurrency as a financial investment security.

Charges against Shin also includes breach of duty, as the customer information and funds of Chai were allegedly used to promote Luna, prosecutors said.

Shin, meanwhile, once again refuted any ties with Terraform Labs following his departure from Do in March, 2020 when he moved on to found Chai.

"It is not true that Shin gained profits by selling Luna at a high point or that he pocketed illegal profits through other unlawful methods," Shin's lawyers said in a statement. (Yonhap)