Workers at Terraform Lab who developed the Terra blockchain network are reportedly not allowed to leave South Korea, as prosecutors have banned them from travelling outside the country. This ban prevented workers within the company from going to escape being questioned by the prosecutors.
This ban was implemented after Terra’s stablecoin UST plummeted from pegged at 1:1 to the dollar on 5th May to 0.03:1 on 13th May. The price of LUNA also dropped from $87 to $0.0005 within the same time frame. This reduced Terra’s value from $24.8 Billion to $959 million in about two weeks.
This news was not received well by a team developer, who branded the latest ban on employees as unacceptable and labelled them as criminals. According to partner Kim Hyeon-Kwon of LKB & Partners, overseeing the matter, “several attorneys at this law firm were Terra investors, and therefore have a personal claim in the case at hand. However, a vocal crypto investigator named FatManTerra, who claims to have direct links with the prosecutors, stated the authorities had difficulties contacting the employees. He went on to add that employees who previously would not have minded giving evidence to the prosecutors are likely to change their minds based on this announcement.
Terraform Labs CEO Do Kwon, who currently resides in Singapore, is also subject to questioning. Current reports suggest that his passport can warrant a suspension to give authorities more time to question him. Many South Koreans are directly blaming Kwon and plan to sue him in civil and criminal court for damages and fraud. With the aim that the court will take Kwon’s assets away.
Prosecutors are suspicious that the Terraform executives, including Mr Kwon, were seemingly aware of what could have happened to Terra and LUNA, with claims about intentional price manipulation and whether assets went through a listing process. One employee added, “there was a warning inside that there could be a collapse at any time.” We understand that customers would go to services on the platform which offer higher interest rates but without the collateral model to deal with the interest payments and changes in value.
The legal case seems to involve countries outside South Korea. The Securities and Exchange Commission in the USA is also investigating Terraform Labs on suspicion of illegally selling unregistered securities to U.S. customers. A Singaporean has also acted against the company on behalf of 1000 Singaporeans who also invested in Terra’s ecosystem.
Moreover, exchanges in Korea have developed a new structure to monitor regulatory compliance and make joint choices to avoid a repeat of Terra’s scenario. The emergency system will be triggered within 24 hours if a comparable disaster occurs.