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South Korea launches investigations into company behind luna crypto crash

South Korean police and prosecutors are investigating Do Kwon’s Terraform labs after the $ 40 billion explosion of its tokens shook the global crypto market.

The Seoul Metropolitan Police Agency said it had opened an investigation into allegations that a Terraform Labs employee embezzled an unknown amount from the company’s bitcoin holdings.

The investigation comes after the South Seoul District Attorneys’ Office opened an investigation in late May into two collective complaints filed on behalf of a total of 81 investors over allegations that “Terraform founders and the company deceived investors with their faulty algorithmic currencies,” according to the documents.

Financial authorities around the world are working to tighten regulation of the crypto market following the spectacular collapse of terraUSD, a stable currency, and its counterpart Luna, Developed by the 30-year-old South Korean.

A special unit for financial crimes in South Korea set up by new Justice Minister Han Dong-hon is conducting an investigation into the crash, a spokesman for the South Seoul District Prosecutor’s Office said.

“We are looking into the case when people have filed complaints against the founders, accusing them of fraud and violations of financial regulations,” the man said.

Some 280,000 South Koreans held 70 billion luna coins, according to the South Korean Financial Services Commission. Investors were drawn to the token in part because they were able to deposit their terraUSD coins for a guaranteed return of 20 percent.

Kwon Did not respond to a request from the Financial Times for comment. According to his acquaintances, Kwon is suspected of being in Singapore.

Daniel Sheen, co-founder of Terraform Labs, has denied investors’ allegations of fraud and breach of financial regulation. “There was no intention of misleading because we just wanted to renew the payment arrangement system with blockchain technology,” Shin told FT.

He added: “We were not aware of any flaws in the currency algorithm and there was no attempt to manipulate their prices.”

Regulators in South Korea are also planning a site review of the digital payment system called Chai, which is run by Shin, as it was previously linked to a terraUSD / luna network, according to the regulator.

Shin said the Chai payment system severed ties with Terraform Labs in 2020.

South Korea was an early adopter of Crypto, With the Korean Wen being the third most widely used currency for bitcoin trading, after the dollar and yen. The win accounts for about 3% of world trade, according to Coinhills data.

More than a dozen bills are pending in the South Korean parliament to strengthen investor protection by holding crypto exchanges responsible for any crypto-related crime like unfair trading and financial fraud.

Since the Luna crash, Terraform Labs has split the Luna blockchain in two on the network’s “hard fork” and given the new Luna coins to previous coin holders.

Nearly two weeks after Luna’s new coins began trading, the currency saw its value plunge to a new low as its price fell more than 80 percent. The currency is currently trading at $ 3.5, according to CoinGecko.

Another report by Scott Chipolina

South Korea launches investigations into company behind luna crypto crash Source link South Korea launches investigations into company behind luna crypto crash

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