2023-3-7 22:48 |
Singapore police have started investigating Terraform Labs, the company behind cryptocurrency Terra Luna Classic (LUNC) and Stablecoin Terra USD (UST), together with its founder, Do Hyeong Kwon, following the events that cost investors billions worth of losses.
The law enforcers wrote Monday in an email with Bloomberg that ‘‘investigations have commenced concerning Terraform Labs, adding that Kwon was not hiding in the country. Before the collapse of Terra Luna, which was renamed Terra Luna Classic and UST, Terraform Labs was based in Singapore. Kwon reportedly fled the city-state shortly after the projects imploded.
Singapore joins the SEC in tracking down Terraform LabsLast month, the US Securities and Exchange Commission (SEC) sued Kwon and his company for committing fraud and selling unregistered securities that eventually cost investors more than $40 billion worth of losses. The SEC further accused the blockchain entrepreneur turned fugitive of withdrawing about 10,000 bitcoins from Terraform platform and Luna Foundation Guard before laundering upwards of $100 million.
The troubles surrounding Terraform started when TerraClassicUSD (formerly Terra USD), a stablecoin created by Kwon, lost its intended peg to the US dollar. Its constant value of $1 was to be achieved through a mix of algorithms and incentives via LUNA. What followed was the collapse of its related cryptocurrency, Terra Luna, to zero in May.
Whether there were indeed algorithms controlling USTBut, the SEC, in its lawsuit, claims that was not the case – there were no algorithms involved, but Kwon falsely represented the ‘purported peg’, yet in essence, he manipulated the price of the stablecoin. The commission pointed to one instance in 2021 when UST dropped under $1, and Kwon sought a third party to buy vast amounts of the stablecoin to restore the peg.
Two months after the collapse of Terra Luna, the South Korean law enforcers raided TFL officers in Seoul with allegations that Kwon was engaging in wash trading, among other illegal activities. The 31-year-old’s whereabouts remain unknown since he received a warrant of arrest in South Korea and an internationally wanted person notice from Interpol.
Even as the world continues to figure out where Kwon could be hiding, the industry is still trying to cope with the domino effects following Terra Luna’s collapse, which wiped out many companies, including Three Arrows Capital, Voyager Digital, and BlockFi.
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