According to South Korean media reports, the Seoul Prosecutor’s Office’s Financial Securities Crime Joint Investigation Team has begun an investigation into the collapse of cryptocurrencies such as Terra USD (UST) and Luna. The investigation targets include Terraform Labs, which built the Terra blockchain project, and Terraform Do Kwon, co-founder and CEO of Labs.
Kwon and Daniel Shin founded Terraform Labs in South Korea in 2019 to build the Terra algorithm stablecoin ecosystem, mainly through its sister coin Luna to maintain anchoring with various fiat currencies. So far, Terra, which supports 18 kinds of fiat currencies, has been issued. The most popular is UST, which is pegged to the US dollar. Terraform Labs also established the non-profit Luna Foundation Guard in Singapore in January this year to maintain the Terra ecosystem in a neutral role.
However, UST and Luna crashed in mid-May, and the market value fell by more than 99%. The current price of UST, which should have been pegged to the US dollar, is only $0.0685, which is used to balance UST. Before the crash, there was still $60 of Luna, and now there are only $60 left. $0.000199. Blockchain analyst Elliptic has estimated that UST and Luna coin users lost $42 billion in a single week in mid-May.
South Korea’s Dong-A Ilbo reported that the investigation by the local prosecutor’s office was prompted by five cryptocurrency investors who filed lawsuits, who lost 1.43 billion won (about $1.13 million) in the crash. In addition, given that Terraform Labs was founded in South Korea, there are about 280,000 Luna investors there, with a total investment of 70 billion won (about 55.1 million US dollars).
“Yonhap News Agency” quoted the prosecution lawyer LKB & Partners as saying that Terraform Labs knew that it contained design loopholes and algorithmic flaws when it designed and issued UST, but not only did not show it in the project white paper, but also infinitely expanded Luna The circulation is undoubtedly fraudulent.