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Terraform Labs: South Korean prosecutors open probe of staff over UST crash

The investigation of Terraform Labs (TFL), the core developers of the Terra blockchain, has gone up another notch in South Korea. Prosecutors are now reportedly probing all staff of the embattled startup to determine if they were aware of and neglected design flaws in UST.

According to a report by local media JTBC, the investigation is being led by the joint financial and securities crime investigation team of Seoul’s Southern District Prosecutor’s Office.

The report reveals that all staff of the firm have been served subpoenas and requested to turn in related company material. The prosecutors have also reportedly secured a statement from an employee that shows that plans to launch UST were opposed within the firm.

The employee, who was one of the early developers of Terra from back in 2019, stated that some employees were against the launch of TerraUSD (UST) as even the pilot model failed. Worsening the situation is the revelation that Basis Cash, another stablecoin project launched by Do Kwon, had previously crashed.

“Even at that time, there was a warning inside that there could be a collapse at any time, but CEO Kwon Do-hyeong forced the coin to be launched,” he said.

The same Prosecutor’s Office has also opened a related investigation into local digital currency exchanges. They are probing whether the exchanges adhered to proper listing processes for UST and LUNA, as well as potential price manipulation.

Similarly, a total of 76 complaints have been filed by victims of the crash, the report revealed. The sum of the claimed losses in the complaints is worth KRW6.7 billion (around US$5.4 million).

Terraform Labs is advancing with projects despite scrutiny

The report comes after local media also disclosed that exchanges had been directed to freeze assets related to Luna Foundation Guard (LFG). LFG is a non-profit that promotes the adoption of the Terra blockchain.

The legal and regulatory troubles have not deterred Terra CEO Do Kwon and the Terra community from pushing a revival plan. Through a vote, the community adopted Kwon’s proposal to migrate to a new Terra blockchain which is named Terra 2.0, with the token LUNA.

The old blockchain and token were renamed Terra Classic and LUNAC, respectively, and are still running. Bloomberg reported that the airdropped LUNA token is already trading on several cryptocurrency exchanges.

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