The staff of embattled blockchain startup Terraform Labs has been summoned for questioning as part of an investigation by the Seoul Southern District Prosecutor’s Office’s joint financial and securities crime investigation team.
According to local news channel JTBC, the investigation sought to determine whether Do Kwon and the blockchain network’s promoters were aware of the flaws in the system and its model before deploying and promoting it to global investors.
The Prosecutors’ suspicions appear to have been answered, as an unnamed staff member who joined Terraform Labs as an early developer in 2019 revealed that there were concerns raised back then about the Terra model’s unsustainable nature, but Do Kwon ignored all warning signs.
Do Kwon’s alleged high-handedness, combined with the fact that he allegedly tried to liquidate his assets in order to relocate Terraform Labs’ operations out of South Korea, has been interpreted as a fraudulent attempt. While Do Kwon has denied all of these allegations, South Korean regulators have decided to leave no stone unturned and have expanded their investigation to include cryptocurrency exchanges.
The regulators want to know if the top crypto trading platforms in the country, such as LUNA and UST, have adequate safeguards in place to prevent future attacks and devaluation. While LUNA and UST investors wait for a recovery, Do Kwon and his team have launched Terra 2.0, which will function without the associated UST stable coin.
Do Kwon returns with Terra 2.0, but it is already crashing. After the release of Luna 2.0, it reached a high of nearly $20. It is now worth around $6.27, representing a nearly 75% drop. CoinMarketCap estimates
A hard fork ensures that Terra is not linked to the current Terra blockchain, but rather to a new blockchain, after which the Terra token can be switched to TerraClassic, Terraform labs’ stable coin that is not algorithmically designed.
Surprisingly, Binance CEO Chengpeng Zhao had previously criticized the hard-fork plan to revitalize the Terra blockchain ecosystem. He even suggested that “burning Terra coins could help.” Burning essentially means sending a specific token to a dead wallet where it can never be recovered, reducing the coin’s supply and thus increasing demand.
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