Korean prosecutors summon all Terraform Labs employees: JTBC

Prosecutors in South Korea have summoned all employees of Terraform Labs to investigate the collapse of TerraUSD, the stablecoin known by its UST ticker, according to a report from local television network JTBC on Saturday.

Specifically, the Seoul Southern District Prosecutors Office’s joint financial and securities crime investigation team has summoned Terraform employees, JTBC reported, without citing any sources.

One unnamed employee, known to have been involved in the initial development of the Terra blockchain in 2019, has reportedly already testified. This employee is said to have told prosecutors that there were concerns about UST’s design from some within Terraform Labs.

The algorithmic stablecoin UST dramatically crashed earlier this month, destroying more than $40 billion of value for investors. UST’s price, which was always supposed to be $1, fell below 10 cents and still hasn’t recovered. It is now trading at 3 cents, according to CoinGecko data. UST’s sister token, luna, lost almost its entire value and is now trading at a fraction of a cent.

Get Your Crypto Daily Brief

Delivered daily, straight to your inbox.

As a result of the implosions, Terraform Labs launched the new Terra blockchain, called Terra 2.0, over the weekend. It abandoned UST as part of the new blockchain and renamed the original luna tokens to “luna classic” (LUNC). 

Per the JTBC report, prosecutors are looking at the whole matter, including whether CEO Do Kwon and other Terraform Labs executives neglected UST’s design flaws. Prosecutors are reportedly also looking into whether local cryptocurrency exchanges went through a proper listing review before listing UST or luna.

Earlier this month, Korea’s financial regulators — the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) — reportedly launched “emergency inspections” into local crypto exchanges to enhance investor protection.

The Block has reached out to Terraform Labs for comment on the JTBC report and will update this story should we hear back.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.