South Korean authorities have summoned the staff of Terraform Labs for a full-scale inquiry into the collapse of UST and LUNC
The South Korean government is apparently calling personnel of Terraform Labs, the company behind the Terra Network as well as the Luna (LUNC) and Terra USD (UST) tokens.
South Korean Authorities Look Into Reason For Terra Crash
According to the local news station JTBC, South Korean authorities have summoned all Terraform Labs personnel as part of a full-scale inquiry into the collapse of UST and LUNC.
The investigation is being carried out by the Seoul Southern District Prosecutors Office’s joint financial and securities criminal investigation team, according to the article.
Authorities are investigating the situation to see whether there were any signs of price manipulation and if the tokens went through legitimate listing procedures.
UST Was Not Pegged To Reliable Collateral
The investigators said that the process behind Terra tokens was flawed from the start because UST is not tied to a reliable collateral or profit scheme.
“At a certain point in time, there is no other way but to collapse because it cannot handle interest payments and fluctuations in value,” the authorities reportedly said.
Luna investors sued Terraform Labs CEO Do Kwon and co-founder Shin Hyun-seun in mid-May, seeking a record of user accounts, marketing materials, and UST-related conversations.
Users Seem Not To Trust Terra
Investors are said to have lost up to $44 million in deposited funds after LUNC fell 99 percent and UST lost its 1:1 peg to the US currency.
Some accounts claim that Terraform Labs shut its South Korean unit days before the Luna and UST collapsed, with some assuming that Kwon closed the local operation to avoid paying taxes.
Terraform Labs and its co-founder were finally fined $78 million by South Korea’s national tax authorities for tax evasion.
The announcement comes as Terraform Labs relaunched Terra 2.0, a new chain aimed at reviving the Terra ecosystem, on May 28.
Binance and FTX, two major crypto exchanges, said they were working closely with the Terra team to promote the next airdrop to assist concerned individuals.
Many investors dumped on Terra 2.0 as the new LUNA token became live, causing the price to drop by 70%.