South Korean Authorities Summon All Terraform Labs Employees

Investigators want to know whether executives were aware of Terra and LUNA's design flaws.

South Korean Authorities Summon All Terraform Labs Employees
Seoul Central District Court Building by Jisoo Song, via Shutterstock

Key Takeaways

  • The Seoul Southern District has summoned employees from Terraform Labs, according to recent reports.
  • Prosecutors are concerned with whether executives were aware of Terra and LUNA's design flaws and risks.
  • Terra (UST) and LUNA Classic (LUNC) collapsed earlier this month; the blockchain has since been relaunched.

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South Korean authorities have launched a new investigation on Terraform Labs, according to reports from JBTC.

Korean Authorities Summon Team

The Seoul Southern District’s joint financial and securities crime investigation team has reportedly summoned all employees from Terraform Labs, the firm behind the UST and LUNA cryptocurrencies.

Prosecutors are apparently concerned with whether Terraform Labs executives were aware of Terra and LUNA’s design flaws, whether intentional price manipulation took place, and whether the relevant assets went through a proper listing process.

One employee stated that, during the launch, “there was a warning inside that there could be a collapse at any time.”

In another statement, it was noted that customers would “flock” to a service that offered high interest. However, without a stable collateral model, such a project would have “no choice but to collapse because it cannot handle interest payments and fluctuations in value.”

Assets on the Terra blockchain collapsed earlier this month. The UST stablecoin has failed to regain its dollar peg and is valued at $0.02 while the LUNA Classic (LUNC) token is valued at $0.0001.

The revived version of the blockchain is faring slightly better: its LUNA cryptocurrency is valued at $9.16, though that price is not nearly as great as LUNC’s original all-time high of $119 in April.

Other Recent Actions Against Terra

This is not the first action that South Korean authorities have taken against the Terra project and its members. Around May 20, investigators began investigating whether or not Terraform Labs or its key principals carried out a Ponzi scheme.

Later, on May 23, Korean authorities requested that exchanges freeze assets related to the Luna Foundation Guard (LFG).

Investors are also preparing to sue Kwon in a civil lawsuit, separate from any actions by authorities that are underway.

Outside of Korea, the U.S. SEC issued a subpoena last year prior to Terra’s recent collapse. A district judge ordered Terraform Labs CEO Do Kwon to comply with the relevant investigation in February.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.

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