South Korean Authorities Launch Probe Into Terra Crash

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South Korean Authorities Launch Probe Into Terra Crash

In Brief

  • The South Korean authorities are investigating whether the recent Terra crash was due to intentional price manipulation and other issues.

  • They are summoning former employees of Terraform Labs who were involved in the initial development of the Terra ecosystem in 2019.

  • One employee has reportedly revealed that the team had doubts about the TerraUSD (UST) stablecoin design from the very start.

  • The prosecutors are investigating whether Terraform Labs CEO Do Kwon was aware of those issues while also looking into potential internal price manipulation.

  • Additionally, the authorities are probing if domestic cryptocurrency exchanges went through proper listing review processes before listing UST and its sister token LUNA.

Do Kwon, from Terraform Labs, is being accused of pushing for the launch of the UST stablecoin, despite being aware of design flaws.

The recent Terra crash is under investigation by South Korean prosecutors. They want to know if there were any signs of intentional price manipulation or other issues, as reported by the local television network JTBC.

According to a report, the Seoul Southern District Prosecutors’ Office has received allegations of crimes involving the former employees of Terraform Labs, who were involved in developing the company's ecosystem in 2019.

They allege that they warned Do Kwon, the founder and CEO of Terraform Labs, that the asset's peg to the USD may eventually fail. Kwon allegedly ignored the warnings and pushed ahead with the launch anyway.

According to an employee, there were warning signs that the coin could collapse at any time. But the CEO, Kwon Do-hyeong, pushed for the launch anyway.

The prosecutors are now investigating whether Kwon may have been aware of those issues, while they also look into potential internal price manipulation.

In addition to that, the authorities are looking into whether the domestic crypto exchanges went through proper listing review processes before listing UST and its sister token LUNA.

The Korea Herald have reported that the Singapore-based company behind TerraUSD, who are believed to have a South Korean branch, had shut it down last year to avoid taxes. The Korea Herald report, however, did not cite any sources.

Terra's UST stablecoin lost its peg to the dollar earlier this month, causing it to implode.

UST crashed and is now worth less than 10 cents. LUNA, which was once a Top-10 coin that was worth $119, is now practically worthless after it fell below 1 cent.

To save the project, Terraform Labs launched a new blockchain called Terra 2.0 over the weekend. The new blockchain dropped the algorithmic stablecoin entirely from the network and renamed the original LUNA tokens to "Luna Classic" (LUNC).

The launch was not without it's bumps though. The revamped Luna initially peaked at $19.54, only to fall to $3.63 in the following hours.

Luna has seen some rebound recently, and is currently trading at $6.42. This is up 13.59% from the past 24 hours.

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