South Korean prosecutors are reportedly looking into the recent Terra crash to see if there were signs of intentional price manipulation and other issues, the local television network JTBC reported on Saturday.
Per the report, the Seoul Southern District Prosecutors’ Office’s joint financial and securities crime investigation team has also summoned former employees of Terraform Labs who were involved in the initial development of the Terra ecosystem in 2019.
One of those employees has reportedly revealed that the team had doubts about the TerraUSD (UST) stablecoin design from the very start.
How Terra's UST and LUNA Imploded
Decrypting DeFi is Decrypt's DeFi email newsletter. Art: Grant Kempster Amid the craziest week in crypto ever, the collapse of Terra's UST stablecoin and governance token LUNA emerged as the biggest story. Amid the crash, LUNA, formerly a top 10 coin by market cap, fell 100% to fraction of a fraction of a cent, and UST, designed to stay pegged at $1, bottomed out at 13 cents. So what the hell happened? Grab your coffee, you're going to need it. There were several forces at work. The first is the...
They also claim to have warned Do Kwon, the founder and CEO of Terraform Labs, that the algorithmic mechanism designed to protect the asset’s peg to the U.S. dollar, may eventually fail, however, Kwon pushed with the launch anyway.
“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 the employee.
Now the prosecutors are investigating whether 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.
South Korean Crypto Exchanges to Face Closer Supervision Following Terra Collapse
After hundreds of thousands of investors fell victim to the collapse of the Terra stablecoin and its sister token LUNA, South Korean financial authorities are planning to enhance monitoring of local crypto exchanges and introduce legal safeguards in the industry, The Korea Times reported Tuesday. "We need to make exchanges play their proper role, and toward that end, it is crucial for watchdogs to supervise them thoroughly," Rep. Sung Il-jong of the ruling People Power Party said during a Nation...
While the JTBC report doesn’t cite any sources, a Korea Herald report on Monday claimed that Terraform Labs, the Singapore-based company behind TerraUSD and Luna, had allegedly shut down its South Korean branch last year to evade taxes.
Allegedly, the company technically dissolved its South Korean branch several months before the shutdown was announced officially.
This, however, contradicts an earlier report by South Korean news site Digital Today, which claimed that the closure of two South Korean offices and the dissolution of the Terraform Labs Korea Corporation happened just days before Terra's collapse.
Enter Terra 2.0
Terra's UST stablecoin imploded earlier this month after losing its peg to the dollar.
The price of UST eventually fell below 10 cents and hasn't recovered. Meanwhile, LUNA, once a Top-10 coin that peaked at $119 at the beginning of April, became practically worthless after plunging below a cent.
In hopes of resurrecting the project, Terraform Labs launched a new Terra blockchain, dubbed Terra 2.0, over the weekend. It dropped the algorithmic stablecoin entirely from the relaunched network and renamed the original LUNA tokens to "Luna Classic" (LUNC).
LUNA Reboot Plummets Over 70% Just Hours After Debut
Terraform Labs early Saturday launched a new version of the Terra blockchain, “Terra 2.0,” with freshly minted LUNA tokens. Roughly 12 hours later, LUNA (labeled LUNA2 on some exchanges) had shed almost 73% of its initial value, trading as of this writing for $5.18, according to data compiled by CoinMarketCap. It peaked earlier at $19.54. LUNA tokens became available for trading at the bybit cryptocurrency exchange about 10 minutes after launch, and about an hour later, Kucoin also announced it...
The launch was not exactly smooth though, with the revamped Luna initially peaking at $19.54 only to fall to $3.63 within the next few hours.
Luna saw some rebound afterwards, though, with the asset currently trading at $6.42, or up 13.59% over the past 24 hours, per CoinMarketCap.
