Singaporean authorities have initiated an investigation into Do Kwon’s Terraform Labs, the company behind the TerraUSD stablecoin, which suffered a catastrophic collapse last year. The US Securities and Exchange Commission has also charged Kwon and Terraform Labs with securities fraud. Kwon is currently on the run, wanted by South Korean officials on fraud charges.
What led to the collapse of TerraUSD?
The TerraUSD stablecoin, developed by Terraform Labs, was meant to have a constant $1 value through a mix of algorithms and trader incentives involving a related token, Luna. However, the stablecoin lost its dollar peg after a wave of sell-offs hit the crypto market in May last year. Terraform Labs managed to partially repair the peg by purchasing $2B UST, but the continued sell-off drained those funds, hyperinflated UST’s sister token LUNA, and crashed the price of both LUNA and UST.
What is the current status of the investigations?
Singaporean authorities have launched an investigation into Terraform Labs, while Kwon is currently on the run from South Korean officials who have charged him with fraud and violating the Capital Markets Act. The US SEC has also charged Kwon and Terraform Labs with securities fraud. Kwon denies the charges, calling them “politically motivated.”
What happened to Do Kwon?
Following the collapse of the Terra ecosystem, South Korean officials launched an investigation into the project, and by September last year, the state issued an arrest warrant for Do Kwon. He is currently in hiding and is wanted on charges of fraud and violating the Capital Markets Act. Reports suggest that he may have taken up residence in Serbia, a country that has never signed an extradition treaty with South Korea.
What led to the bankruptcies in the cryptocurrency industry?
The collapse of TerraUSD has been linked to a recent wave of bankruptcies in the cryptocurrency industry. After the project crashed, several prominent crypto companies, including FTX and Three Arrows Capital, declared bankruptcy. Some reports suggest that FTX might have contributed to the collapse of TerraUSD, even though it filed for bankruptcy after the UST incident.
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