South Korea launches investigations into firm behind luna crypto crash


South Korean police and prosecutors are investigating Do Kwon’s Terraform Labs after the $40bn implosion of his tokens rattled the worldwide crypto market.

The Seoul Metropolitan Police Agency stated it had launched a probe into allegations that an worker of Terraform Labs embezzled an undisclosed quantity of the corporate’s bitcoin holdings.

The probe comes after the Seoul Southern District Prosecutors’ Office launched an investigation in late May into two collective complaints filed on behalf of a complete of 81 traders over allegations that “Terraform founders and the company deceived investors with their flawed algorithmic coins”, based on the paperwork.

Financial authorities world wide are working to tighten regulation of the crypto market following the spectacular collapse of terraUSD, a stablecoin, and its counterpart luna, developed by the 30-year-old South Korean.

A particular monetary crimes unit in South Korea revived by new justice minister Han Dong-hoon is conducting an inquiry into the crash, stated a spokesperson from the Seoul Southern District Prosecutors’ Office.

“We are looking into the case as people filed complaints against the founders, accusing them of fraud and violations of financial regulations,” the particular person stated.

About 280,000 South Koreans had been holding 70bn luna cash, based on South Korea’s Financial Services Commission. Investors had been drawn to the token partially as a result of they might deposit their terraUSD cash for a promised 20 per cent yield.

Kwon didn’t reply to a request from the Financial Times for remark. Kwon is believed to be in Singapore, based on his acquaintances.

Daniel Shin, the co-founder of Terraform Labs, denied the accusations by traders of fraud and breaching monetary regulation. “There was no intention of deception as we just wanted to innovate the payment settlement system with blockchain technology,” Shin instructed the FT.

He added: “We were not aware of any flaws in the coins’ algorithm and there was no attempt at manipulating their prices.”

South Korean regulators are additionally planning to conduct an on-site assessment of the digital fee system known as Chai, run by Shin, as a result of it was linked to the terraUSD/luna community earlier than, based on the regulator.

Shin stated the Chai fee system minimize ties with Terraform Labs in 2020.

South Korea was an early adopter of crypto, with the Korean received being the third most generally used forex for bitcoin buying and selling, after the greenback and yen. The received accounts for about 3 per cent of world buying and selling, based on information from Coinhills.

More than a dozen payments are pending in South Korea’s parliament to strengthen investor safety by holding crypto exchanges accountable for any crypto-related crimes equivalent to unfair buying and selling and monetary scams.

Since the luna crash, Terraform Labs has cut up the luna blockchain in half in a “hard fork” of the community and awarded the brand new luna cash to earlier holders of the cash.

Nearly two weeks after the brand new luna cash started buying and selling, the coin has seen its worth plunge to new lows with its worth dropping greater than 80 per cent. The coin is now buying and selling at $3.5, based on CoinGecko information.

Additional reporting by Scott Chipolina