Former employees of Terraform Labs, the company behind the Terra-Luna stablecoin that collapsed in May last year, are being questioned by the Federal Bureau of Investigation and prosecutors from the Southern District of New York, the Wall Street Journal reported citing unnamed sources familiar with the matter. Terra-Luna founder Do Kwon, a South Korean, is the subject of an Interpol Red Notice and believed to be living in Serbia.

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Fast facts

  • The Justice Department’s investigation covers similar ground as the lawsuit filed by the U.S. Securities and Exchange Commission (SEC) last month, which includes the relationship between the Terra blockchain and South Korean payment app Chai, according to the Journal report.
  • The SEC alleged that Do Kwon, whose full name is Kwon Do-hyung, and Terraform defrauded investors by saying that Chai used Terra blockchain to process payments, to add value to the Luna cryptocurrency.
  • The SEC also claims that Kwon and Terraform raised billions through an unauthorized offer and sale of crypto asset securities, including the TerraUSD algorithmic stablecoin and mAssets, which are tokens that mirror the price of U.S.-based stocks. 
  • Terraform Labs has not yet responded to Forkast’s email request for comment sent Tuesday morning in Asia.
  • It was reported last week that Singapore police started an investigation into Terraform Labs, which was based in the city-state before the US$40 billion Terra-Luna stablecoin imploded. 
  • South Korean prosecutors have been investigating Kwon and questioning former Terraform staff since May last year. They recently flew to Serbia, Kwon’s last known location, to ask local authorities to assist their investigation and have charged Kwon with fraud. The Seoul Southern District Prosecutors’ Office, which is in charge of the investigation, declined to comment on the Journal report when contacted by Forkast
  • Kwon has denied all the charges against him, which he has said are politically motivated. On the Unchained Podcast in October last year he said no fraud took place at Terra-Luna.
  • Terraform Labs’ crypto project collapsed in May of last year following the depegging of the Terra stablecoin and the value of its sister Luna cryptocurrency plunged to zero from around US$120. 

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