Wednesday, 15 March 2023

Report: DOJ and FBI Investigating Terraform Labs in Connection to Algorithmic Stablecoin Collapse

by Berkeley Lovelace

Report: DOJ and FBI Investigating Terraform Labs in Connection to Algorithmic Stablecoin Collapse

The Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) are reportedly investigating the collapse of the algorithmic stablecoin terra usd (UST) and the firm Terraform Labs. Unnamed sources say that former staff members from Terraform Labs, the company behind the Terra blockchain project, have been questioned by U.S. law enforcement.

Unusual Relationship: Report Claims Terraform Labs and South Korean Payment Firm Chai Under U.S. Investigation

After the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Terraform Labs and its CEO, Do Kwon, accusing them of fraud and orchestrating “a multibillion-dollar crypto-asset securities fraud,” the DOJ and FBI are allegedly investigating Terraform Labs. The Wall Street Journal’s Alexander Osipovich reports that people familiar with the matter have detailed that the FBI and the Southern District of New York DOJ have been questioning former members of the Terraform Labs team.

According to sources, the DOJ’s probe is not much different from the SEC’s allegations, and investigators are also looking into the relationship between Terraform Labs (TFL) and the South Korean payment firm Chai. The co-founder of TFL, Daniel Shin, created the payment firm Chai, and it has been alleged that the company helped Terra launder funds. Several social media reports have shown that Terraform Labs and Chai had an unusual relationship. In mid-November 2022, it was reported that South Korean investigators were probing Chai and Daniel Shin.

Osipovich noted that the WSJ contacted the SDNY DOJ and Terraform Labs, but both declined to comment. The report also noted that it “couldn’t be learned what specific charges” the DOJ may be pursuing, and the case could be dropped. Do Kwon’s lawyer and the attorney for TFL are attempting to get the SEC lawsuit dismissed, and Kwon vehemently denies committing fraud. Kwon has not been active on social media since February 1, 2023.

Currently, the once-stablecoin Terra USD (UST), now referred to as USTC, is trading for $0.023 per unit. Terra’s former native asset, LUNA, now referred to as Luna Classic (LUNC), is priced at $0.00013233 per coin on Tuesday. Furthermore, the second iteration of Terra’s native crypto asset, LUNA 2.0, is exchanging hands today for $1.42 per unit. TFL CEO Do Kwon was living in Singapore, but his whereabouts are currently unknown. Prosecutors from South Korea think that Kwon may be in Dubai and possibly even Serbia.

What do you think the outcome of the DOJ and FBI investigation into Terraform Labs will be? Share your thoughts in the comments section below.