- FBI and SDNY are probing the collapse of Terra’s algo-stablecoin – UST
- The agencies investigation is on similar lines as that of the SEC, which charged Do Kwon for committing securities fraud
The United States Justice Department is reportedly investigating the collapse of the once-leading algo-stablecoin – TerraUSD (UST). According to a report by Wall Street Journal, the Federal Bureau of Investigation (FBI) and the Southern District of New York (SDNY) have started to probe UST’s collapse.
The report states that both authorities have interrogated former employees of Terraform Labs – the company behind the algo-stablecoin. Additionally, the agencies are working on interviewing more individuals connected to the case, the report said. This investigation could possibly open a criminal case against Do Kwon – the founder of Terraform Labs.
Justice Department’s TerraUSD probe follows SEC’s investigation
Notably, the developments come nearly a month after the US Securities and Exchanges Commission (SEC) filed a lawsuit against Do Kwon and Terraform Labs. The charges alleged that Kwon and his firm had committed securities fraud and engaged in a scheme to defraud investors. The lawsuit claimed that the stablecoin – UST and LUNA were securities. The Justice Department’s investigation is on the same lines as that of the SEC, however, the charges that would be registered against Kwon and the firm are still unclear.
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Moreover, the FBI and SDNY are reportedly probing matters related to Chai payments, according to WSJ. Terraform Labs had falsely claimed that ‘Chai’ – a South Korean mobile payment application used Terraform’s blockchain to process commercial payments, as per the SEC charges. In addition, the firm allegedly replicated the transactions to make it look like the blockchain was used for payments.
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Subsequently, US prosecutors are investigating the conversations of Jump Trading – a proprietary trading firm, Jane Street Group – a quantitative trading firm, and Alameda Research – the investing arm of FTX. According to a report by Bloomberg, the Telegram chat of these firms is reportedly investigated in relation to possible market manipulation.
Moreover, the authorities are also seeking information on conversations related to a potential bailout of the failed stablecoin. Notably, the prosecutors have not accused any individual in relation to this and the investigation could end without any charges.