South Korean police suspected Terra of embezzling investors’ funds

The law enforcers have asked the exchanges to freeze the corporate assets of the Luna Foundation Guard, an organization created to support the TerraUSD stablecoin

24.05.2022 - 07:25

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What’s new? The Seoul Metropolitan Police Department has asked the local exchanges to block the possibility of any corporate funds being withdrawn by the non-profit organization Luna Foundation Guard (LFG). This is due to an investigation into the rate collapse of the TerraUSD (UST) stablecoin and its backing token LUNA. This is reported by the national broadcaster KBS.

News on the KBS website

What is known about the reasons behind the decision? According to the law enforcers, evidence has been found that points to the embezzlement of investors’ funds by the LFG. The appeal to the exchanges to freeze assets is designed to prevent their further use. Under South Korean law, the platforms are not obliged to comply with this request.

What events happened before? On May 8, the rate of the algorithmic stablecoin UST lost its peg to the dollar and dropped to $0,22 over the following days. The LUNA token rate also collapsed by 86% per day. As of May 24, the UST rate stands at $0,066 and LUNA at $0,000167 (Binance data).

Terraform Labs CEO Do Kwon applied to liquidate the company’s headquarters in Busan and offices in Seoul on April 30, days before the network collapsed. On May 4 and 6, the application was approved by authorities, after which Terraform Labs ceased to legally exist in South Korea.

The country’s authorities recreated a special organization to investigate financial and securities crimes. The organization is investigating the collapse of Terra as its first case. For a full timeline of the events surrounding the rate collapse of UST and LUNA, see GetBlock Magazine’s special feature.

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