Terraform Labs’ Legal Woes Worsen as South Korean Authorities Investigate

Crypto Regulation
Terraform Labs’ Legal Woes Worsen as South Korean Authorities Investigate

South Korean authorities are currently investigating Terraform Labs and its staff on various accusations, including tax evasion and market manipulation.

Seoul Police Probe Terraform Labs

Terraform Labs, the parent firm responsible for the demise of the Terra ecosystem, is presently the subject of various investigations by South Korean authorities.

The latest inquiry is centered on the suspected theft of Bitcoin (BTC) from the company’s treasury. According to a local daily report, the Seoul Metropolitan Police Agency received an intelligence tip last month about probable BTC misappropriation by one of the firm’s employees.

According to the authorities, the inquiry into the suspected embezzlement of BTC from the firm’s treasury had no clear relation with tainted co-founder Do Kwon, and they are currently examining individual embezzlement charges.

Authorities were able to freeze the stolen funds via a crypto exchange until the investigation was completed. However, the exact amount of the stolen funds have not been revealed.

In the aftermath of the collapse, the Luna Foundation Guard (LFG), a fund established by the firm that housed over $3 billion in Bitcoin reserves, became the focus of attention. The BTC fund was applied to support balancing the TerraUSD Classic (USTC), an algorithmic stablecoin. The firm said that it expended all of its BTC holdings in a failed attempt to stabilize USTC.

Terraform Labs Co-founder Denies Deception

Terraform Labs co-founder Daniel Shin refuted any charges of malpractice or fraud in a recent interview with the Financial Times. He said:

“There was no intention of deception as we just wanted to innovate the payment settlement system with blockchain technology.” 

South Korean authorities have initiated a comprehensive inquiry into the recent demise of the Terra ecosystem, as well as the role of Terraforms Labs employees and co-founder Do Kwon.

The first investigation was launched in the second week of May after 81 investors submitted two complaints against the company for misleading investors with a faulty token.

The new president revived South Korea’s dreaded investigative and prosecuting team known as the Grim Reapers of Yeouido to investigate Terraform Labs. The South Korean Conservative Party later demanded a parliamentary hearing on the subject.

In the final week of May, Korean authorities issued subpoenas to all Terraform Labs staff in order to investigate any potential internal role in market manipulation. Crypto exchanges were also asked by authorities to place a freeze on any funds linked to the LFG.

Terraform Labs was charged $78 million by South Korea’s national tax authorities for tax evasion charges that surfaced during various post-collapse investigations into the firm.

The collapse of the $40 billion Terra ecosystem has not only led to legal issues for the project’s founders but has also prompted regulators around the world to reconsider their crypto regulation strategy. Korea established a new crypto oversight committee, while Japan amended its legislation to allow only trust companies and banks to issue stablecoin.

LUNA price is currently down by 22.6% over the past 24 hours, trading at $2.74, according to data from CoinMarketCap.

Rony Roy

Rony Roy is an electrical engineer turned tech author in the Cryptocurrency space. He got block-chained in 2012 and fell in love with tech and its use-cases and has been writing his way through innovations in this emerging sector. Over the years, he has worked with multiple Blockchain projects and premier cryptocurrency exchanges both national and international.