Binance to investigate Terraform Labs

The head of the exchange Changpeng Zhao has instructed to study information about Do Kwon’s possible fraud published by an insider

02.06.2022 - 12:30

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What’s new? Cryptocurrency exchange Binance will launch an internal investigation into the activities of Terraform Labs (TFL). The head of the exchange Changpeng Zhao has instructed an investigation team to look into the allegations made by an insider nicknamed FatMan against TFL CEO Do Kwon. Zhao said this in an interview with Fortune.

Interview on Fortune

More details about the charges. FatMan claims that the Terra team, including validators, manipulated the tokenomics of its asset in order to change the market situation, as well as engaged in insider trading. Zhao instructed to verify these statements and also noted that the exchange is cooperating with law enforcement agencies in many countries. He added that he can not confirm or deny any of these allegations at the moment.

Zhao called Terra’s collapse “a disaster. It’s not good for anybody.” He also believes that mistakes were made when designing the algorithmic stablecoin TerraUSD (UST) and the blockchain itself. Zhao also disagreed with the way the launch of the new network was conducted. However, the exchange will continue to provide liquidity to the LUNA 2.0 token for the benefit of its customers.

On May 20, Zhao said that Terra developers could have saved the project if they had used reserves when the UST rate deviated from the US dollar by 5%. He also said that the exponential issuance of LUNA did not contribute to market capitalization and creation of value, but only exacerbated the problem. However, he does not believe that the consequence of the incident was a scam scheme at the heart of the project.

What happened before? On May 28, the Terra 2.0 blockchain was launched with the issuance and airdrop of new LUNA tokens. For a detailed timeline of events surrounding the creation and launch of the network, see GetBlock Magazine’s article.

South Korean authorities also launched an investigation into Do Kwon and other TFL employees. According to the prosecutor, the company’s employees said they had doubts about the relaunch.

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