After the LUNA/UST disaster that rocked the crypto market, the Korean government is continuing to investigate Terraform Labs, the company behind the Terra platform. According to local news agency JTBC, South Korean prosecutors have summoned all Terraform Labs employees to investigate Terra’s collapse. The probe is conducted by the joint financial and securities crime investigation team of the Seoul Southern District Prosecutors Office.
Accordingly, they are looking into the case to check for signs of intentional price manipulation and whether tokens such as LUNA and UST ensure proper listing procedures. The highlight of this investigation is that one unnamed employee, known to have participated in the initial development of the Terra blockchain in 2019, has reportedly already testified.
The employee is said to have told prosecutors that he (she) had raised his concerns to founder and CEO Terra Do Kwon about the possible risks of the LUNA-UST model from the very beginning. As a result, investigators are alleging that Terra’s mint-burn mechanism was faulty in the first place because UST is not pegged to a stable collateral or profit model.
As previously reported, CEO Do Kwon is not only facing legal trouble but also has to fight a class action suit by Korean investors. Given the seriousness of the matter, Financial Services Commission and Financial Supervisory Authority, the two leading financial regulators in Korea, had to re-established the financial task force “Death” to investigate Terra. Even the Korean police want to freeze the assets of the Luna Foundation Guard – an organization that spent up to 3 billion USD in Bitcoin in just three days to save Terra but still failed. In the midst of many troubles, sadly, the in-house legal team at Terraform Labs resigned all at once.
In addition, various reports also revealed that Terraform Labs had quietly dissolved its South Korean branch several months before the shutdown was announced officially. Some speculated that CEO Do Kwon was looking to evade taxes. The Korean Tax Agency also decided to fine Terraform Labs and Do Kwon $78 million for tax evasion; however, Terra Founder still insisted that his company did not commit the above crime.
On May 28, Terraform Labs launched a new blockchain called Terra 2.0 after the proposal to revive Terra was approved with more than 67% of votes. Many major cryptocurrency exchanges including Binance and FTX have supported this coin as well as conducted airdrops to distribute coins to users. However, the price of LUNA 2.0 dropped by 74% after nearly a day of listing, with many investors dumping on Terra 2.0.
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