The collapse of the stablecoin TerraClassicUSD (USTD) last year is being investigated by the United States Department of Justice because it led to the loss of $40 billion in the Terra ecosystem. The possibilities of criminal charges being brought against South Korean crypto entrepreneur and stablecoin founder Do Kwon, and his business Terraform Labs have increased due to the inquiry.
As The Wall Street Journal reported, the former Terraform Labs team members have already been interviewed by the FBI and the U.S. Attorney’s Office for the Southern District of New York.
Kwon’s scandalous stablecoin scheme
Moreover, the Securities and Exchange Commission (SEC) filed a criminal complaint against Kwon and Terraform Laboratories in federal court in Manhattan last month. The complaint charged Kwon and Terraform Labs with misleading investors about the danger of the algorithmic-based stablecoin.
In May of 2022, the TerraUSD stablecoin lost its peg, which caused a $40 billion loss in market value. The fall in the market value of coins inside the Terra ecosystem also led to a reduction in many investors’ available money, which was a contributing factor in the overall drop.
Hence, the investigators have questioned the connection between the Terra blockchain and Terra, the operational platform for TerraIUSD in South Korea. The SEC also claims that Kwon misled investors by saying that the Terraform blockchain will be used to handle all Chai operations.
TerraUSD Market Manipulation Probe
According to reports, Manhattan Federal Prosecutors are also investigating a series of chat-group talks involving members of the top trading businesses, Jane Street, Alameda Research, and Jump Trading. The probe examines whether the TerraUSD stablecoin project used market exploitation techniques.
Kwon allegedly fled South Korea following the collapse, making stops in Singapore and Dubai before being presumed to be in Serbia, as stated by South Korean officials. Even though two South Korean officials were sent to Serbia to identify Kwon, they were unsuccessful in their search efforts.