n a shocking revelation, a whistleblower from the U.S. Securities and Exchange Commission (SEC) has exposed that the Chai payments app in the Terra ecosystem did not utilize cryptocurrency as previously claimed. This revelation has raised concerns about the transparency and authenticity of the Terra blockchain and its associated projects.
The Whistleblower's Revelation
The SEC whistleblower has provided evidence that the Chai payments platform, which was touted as a real-world use case for the Terra blockchain, did not actually operate on the blockchain as claimed. Instead, payments were settled using traditional methods and then "mirrored" on the Terra blockchain through a server controlled by Do Kwon, the co-founder of Terraform Labs.
The evidence presented by the SEC includes an email from a Chai employee stating that transactions were processed outside the blockchain and only recorded on the Terra blockchain in parallel. Additionally, a whistleblower who served as Chai's Chief Product Officer disclosed that a former Terraform employee informed them that there was no crypto involved within Chai.
Disputes of Material Fact
While the evidence seems compelling, Judge Jed Rakoff, who presided over the case, acknowledged that there are still disputes of material fact. The credibility of the whistleblowers is being questioned, as the defense argues that one of them attempted to extort Do Kwon and Daniel Shin, the co-founder of Terra and founder of Chai, after being terminated from Chai. Inconsistencies in the whistleblower's account have also been noted, raising doubts about their direct knowledge of Chai's systems.
Implications for Terra and the Crypto Industry
This revelation has significant implications for Terra and the broader crypto industry. It raises questions about the transparency and trustworthiness of blockchain projects and their claims. The reliance on traditional methods for settling payments in the Chai app undermines the decentralized nature of blockchain technology and challenges the credibility of Terra as a blockchain platform.
Terra's Legal Troubles
This is not the first legal trouble that Terra and its co-founders have faced. Just recently, a federal judge ruled that Do Kwon and Terraform Labs violated US law by failing to register two digital currencies that collapsed in 2022. The SEC's fraud claims against Terra and its founders will proceed to trial in early 2024.
The future of Chai and Terra is uncertain in light of these revelations. The credibility of the Chai payments app has been severely undermined, and investors and users may question the viability of the Terra ecosystem as a whole. It remains to be seen how Terra and its founders will address these issues and regain trust from the crypto community.