The South Korean government has begun an investigation into the ecosystem-wide collapse of Terra. According to allegations from local media, Korean prosecutors have summoned all former staff of Terraform Labs to examine, among other matters, the possibility of purposeful pricing manipulation.
Korean Prosecutors Investigate Terraform Labs’ Staff
Local media outlet JTBC reported that the joint financial and securities criminal investigation unit from Seoul Southern District Prosecutors’ Office had summoned Terraform personnel who participated in the early development of the Terra ecosystem in 2019.
One of these individuals said that the team had issues with the TerraUSD (UST) stablecoin’s design. They also claimed they had warned Terraform Labs CEO Do Kwon of the algorithmic mechanism’s loopholes and the stablecoin’s possibility of losing its dollar peg. However, Kwon still proceeded with the launch.
“Even at that time, there was a warning inside that there could be a collapse at any time, but CEO Kwon Do-hyeong forced the coin to be launched,” said an employee.
The prosecutors are probing whether Kwon overlooked UST’s design problems purposefully before the launch and the possibility of pricing manipulation inside the corporation. The authorities also inspect if the local cryptocurrency exchanges followed correct listing processes before listing UST and its companion coin LUNA.
After Terra’s $40 billion meltdowns, South Korean authorities convened an emergency conference with representatives from major cryptocurrency exchanges to determine if they had established proper investor safeguards.
Some accounts suggest that Kwon closed the South Korean branch days before the collapse, with some claiming that the CEO did so to avoid paying taxes.
Are these investigations putting Terra 2.0 at risk?
Are these investigations putting Terra 2.0 at risk? Image: ytimg
The value of UST and LUNA plummeted to zero quickly, wiping away billions of dollars. Numerous investors who lost significant sums of money due to the collapse have already filed lawsuits against Do Kwon.
The announcement that Korean prosecutors are beginning a formal enquiry into the stunning dual-token meltdown coincides with Terraform Labs’ unveiling of “Terra 2.0,” a new version of the Terra blockchain designed to revive the ecosystem and boost its long-term development.
The newly issued LUNA (marked LUNA 2 on various exchanges) was first offered at about $18. It reached an all-time high of $19.53 immediately after tokens were airdropped to investors before losing 71% of its original value. As of this writing, the token was traded at $8.75.
Some experts feel that confidence in the Terra environment has faded away despite the ambitious revival effort. Billy Markus, co-creator of Dogecoin, has previously said that investors in Terra 2.0 will “show the world just how truly dumb crypto gamblers really are.”