The former boss of crypto company Terra Labs, Do Kwon, admitted to falsifying trading volumes, according to court documents from the US Securities and Exchange Commission (SEC).

An SEC filing on Sept. 22 shows a text message exchange between Do Kwon and Daniel Chin, the founder of payment app Chai, in which Do Kwon told him he could only make fake transactions that looked real that would result in fees.

Chai partners with Terra Do Kwon to speed up payments. But last year, Terra went bankrupt and now the SEC is accusing Do Kwon of fraud.

In the SEC’s lawsuit against Terra, the agency alleged the partnership was not what was marketed to users and that Terra never replaced Chai’s payment system.

This accusation is a big accusation considering that Chai’s founder, Daniel Shin, also founded Terraform with Kwon in 2018.

In a statement on Twitter, Terraform Labs CEO Chris Amani dismissed the leaked text messages as not incriminating.

“This is a personal conversation, about the need to increase validators to ensure chain security. In many Cosmos chains today, this is done through inflation rewards. Terra only relies on fees so they need another way to do it,” said Amani, quoted from Decrypt, Tuesday (3/10/2023).

In 2019, Terra announced its partnership with Chai, writing in a blog post they would rebuild the payments stack on the blockchain to simplify legacy payment systems and pass transaction fees at a discount to merchants.