All Terraform Labs Staff Subpoenaed as Investigations Ramp Up, Report

In Seoul, financial and securities crime investigators have reportedly subpoenaed all employees of Terraform Labs, the crypto startup behind failed algorithmic stablecoin UST

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Source: Shutterstock and Terra

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key takeaways

  • Prosecutors have reportedly secured a statement indicating some Terraform Labs staff were opposed to launching UST and LUNA after internal modeling failed
  • At least 76 victims have now filed a formal complaint against founder Do Kwon and co-founder Shin Hyun-seong

Investigations into South Korean crypto startup Terraform Labs – the firm behind failed stablecoin ecosystem Terra – are ramping up.

Led by its joint financial and securities crime investigation team, Seoul’s Southern District Prosecutor’s Office is now probing the firm’s employees, according to local media JTBC citing a Terraform Labs employee familiar with the matter.

Authorities have subpoenaed all Terraform Labs employees and requested they submit related company materials, reported JTBC on Saturday, labeling it a “full-scale investigation.” The outlet’s source was said to have worked at Terraform Labs throughout initial development of the Terra blockchain network in 2019. 

LUNA changed hands for around $3.30 after it was first listed on South Korean exchange Coinone in May 2019. After one year, LUNA had already fallen 94%, to below $0.20. 

It was only around three months after Terraform Labs co-founder and CEO Do Kwon launched doomed stablecoin UST, in September 2020, that LUNA began its meteoric rise. UST aimed to maintain its dollar-peg with an algorithm that burned LUNA in exchange for UST.

The market valued LUNA at $85 at the start of 2022, price appreciation of more than 40,000% in 18 months. UST was meanwhile keeping its dollar-peg, albeit with a few small hiccups.

But UST wouldn’t survive much longer. Earlier this month, the token dramatically de-pegged from the US dollar – falling from $1 to $0.15 in under a week.

Investor exodus simultaneously sent LUNA crumbling to a fraction of a cent. UST and LUNA together boasted nearly $50 billion in market value before the de-pegging; they were worth $3 billion one week later.

Now, on the backdrop of Kwon’s attempted revival of the Terra ecosystem on a different blockchain (with different tokens), investigators have reportedly secured a statement claiming some Terraform Labs insiders were opposed to launching LUNA and UST, after internal modeling of the protocol ultimately failed.

Despite apparent employee pushback, Kwon pushed to deploy the tokens, noted JTBC. Seoul prosecutors are now probing whether local crypto exchanges adhered to proper listing processes for UST and LUNA, as well as potential price manipulation.

While official investigations play out, 76 victims have filed a complaint with the Prosecutor’s Office against Kwon and Terraform Labs co-founder Shin Hyun-seong. In total, those complaints are tied to losses worth 6.7 billion won ($5.4 million), according to JTBC.


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