South Korea’s Tax Authorities Issue Do Kwon A $78M Fine For Tax Evasion
Do Kwon, Terra co-founder, is facing a $78 million fine for tax evasion, according to local news reports.
South Korea’s National Tax Service has issued Terraform Labs, its co-founder Do Kwon, and other executives to pay a 100 billion won ($78 million) fine for tax evasion fines.
Local reports say that the tax agency initially launched an investigation into Terraform Labs and its subsidiaries in June 2021, as they suspected corporate and income tax evasion.
According to the investigation findings two of the company’s subsidiaries were registered abroad in the Virgin Islands and Singapore. While the two entities had foreign registration, the place of actual management of the firms was deemed to be in South Korea.
South Korean corporate tax laws treat foreign-registered companies as domestic entities if the management and operations of firms are conducted in the country. Therefore, Terraform Labs’ subsidiaries are required by law to fulfill tax obligations to the Korean government.
In October last year, the Korean tax authorities ordered Terra’s subsidiary in the Virgin Islands to pay a fine of 44.7 billion won ($34.7 million) in corporate tax and 4.66 billion won ($3.6 million) in income tax.
Do Kwon became dissatisfied with the country’s tax rules in December last year, according to the local news reports. He tried to liquidate the company’s domestic headquarters and take up residence abroad just before the catastrophic Terra LUNA collapse a little over week ago.
During the UST crash, Terraform Labs sent LUNA Terra Singapore to the LUNA Foundation Guard (LFG), perhaps in an attempt to reimburse anchor protocol for the losses suffered. The tax authorities saw the move as suspicious, causing the agency to believe that the company was trying to evade taxes, according to the report.
Just a day before the $78 million tax penalty, reports emerged that Korean investors have filed criminal and civil lawsuits against Do Kwon. UST and LUNA investors also want the court to seize Kwon’s assets.
Another Korean group who lost money in the UST/LUNA crash, also plans to file a class action against Terra co-founders Do Kwon and Shin Hyun-Seong for fraud and illegal crowdfunding.
