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Blog|News|According to reports, South Korean officials are investigating the Terra crash for indications of deliberate pricing manipulation and other concerns
Published May 30, 2022|2 min read

According to reports, South Korean officials are investigating the Terra crash for indications of deliberate pricing manipulation and other concerns

The announcement comes as Terraform Labs relaunches Terra's new chain, Terra 2.0, on May 28 in an effort to restore the defunct Terra ecosystem. Major cryptocurrency exchanges, like Binance and FTX, have said that they are collaborating closely with the Terra team to promote the forthcoming airdrop, which will assist impacted consumers. Shortly after coming online, the price of the new LUNA coin plunged 70 percent, as many investors dumped Terra 2.0.

Is Do Kwon in More Trouble as He Doesn't Kwon What Went Wrong?

Local news outlet JTBC reported on Saturday that South Korean authorities had summoned all workers of Terraform Labs as part of an extensive probe into the collapse of UST and LUNC.

According to the report, the combined financial and securities criminal investigation team of the Seoul Southern District Prosecutor's Office is conducting the inquiry. The authorities are examining the matter for indications of purposeful price manipulation and to see if the tokens were listed according to the correct procedures.

According to reports, the investigators also argued that the Terra token's mechanism was flawed to begin with, as stablecoin UST is not tethered to a stable collateral or profit model. The authorities allegedly said, "At a certain point, there is no other option except to collapse since it cannot sustain interest payments and value changes."

As reported, Terra investors filed a class action lawsuit against Terraform Labs CEO Do Kwon and co-founder Shin Hyun-seun in mid-May, requesting a record of user accounts, marketing materials, and conversations pertaining to UST. After LUNC plummeted 99 percent and UST lost its 1:1 peg to the U.S. dollar, the investors allegedly lost as much as $44 million worth of deposited money.

According to some sources, Terraform Labs shut its South Korean operation days before to the collapse of LUNC and UST, with others thinking that Kwon did so to avoid paying taxes. Terraform Labs and its co-founder were ultimately fined $78 million for tax evasion by the national tax authorities of South Korea.