The United States Department of Justice (DOJ) has reportedly launched an investigation against Terraform Labs and its former employees to explore what led to the collapse of the project’s native token, LUNA, and its algorithmic stablecoin, UST.
The US SEC recently accused the entity and its co-founder, Do Kwon, of orchestrating a massive fraud, suggesting that this could be the main factor behind the catastrophe.
The US Department of Justice joins the club
According to a Wall Street Journal coveragethe FBI and the Southern District of New York began questioning former members of Terraform Labs to investigate the reasons behind the LUNA/UST crash in May of last year.
The US SEC archived charges were brought against the organization and its co-creator, Do Kwon, earlier this year, alleging that they ran a massive scam by offering and selling unregistered securities through the use of digital currencies. According to the agency, the scheme caused serious financial losses for institutional and retail investors.
It also accused Terraform Labs of making false claims that it was associated with a leading mobile payment application in Korea. The Commission added that Kwon allegedly aimed to drain client funds and then use them for personal gain.
If investigations launched by the SEC and DOJ were to determine that the blockchain entity and Do Kwon were guilty, this could lead to prison terms for the South Korean developer and some of his former colleagues.
earth’s failure was among the darkest events in cryptocurrency in 2022. UST, which was supposed to be fixed at $1 valuation, de-pegged against the dollar and plunged well below its target, sparking an infinite arbitrage cycle that finally cleared the value of UST.
This hyperinflated the supply of the native currency, and eventually both assets lost virtually all their value in a matter of days. The disappearance not only caused economic losses, but also led to suicides.
Searching for the alleged culprit
Numerous institutions and investors accused Do Kwon of having a role in the collapse, insisting that he should face justice. The 31-year-old developer was reluctant to cooperate and allegedly went into hiding in different locations around the world, with Dubai, Singapore, Russia and Mauritius being some of the possible locations.
The most recent sources hinted that he may currently be residing in Serbia. As crypto potato reportedA delegation of South Korean authorities arrived in the Balkan nation last month to search for Kwon (who is also being persecuted by Interpol).
Interestingly, he swore to reveal his whereabouts in November 2022 and even invited law enforcement to participate in the event. Kwon has yet to provide the promised data and has kept a low profile on Twitter, posting nothing for several months.
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