TerraUSD Creator Under Investigation: Criminal Charges In the US Loom

Zinger Key Points
  • The U.S. Department of Justice probe covers similar territory as the SEC suit.
  • Do Kwon is accused of allegedly misleading investors about the usage of Terraform's blockchain technology.

The U.S. Department of Justice is reportedly investigating the collapse of TerraUSD LUNC/USD, a stablecoin created by South Korean crypto entrepreneur Do Kwon.

This could potentially result in criminal charges against Kwon.

Citing sources familiar with the matter, a Wall Street Journal report stated the investigation involves questioning former team members of Kwon's company, Terraform Labs Pte. Ltd., and seeks to interview others.

The Federal Bureau of Investigation and the Southern District of New York, both part of the Justice Department, are conducting the probe.

Last month, the Securities and Exchange Commission (SEC) filed a civil fraud lawsuit against Kwon and Terraform Labs.

The lawsuit alleged Kwon and the firm misled investors about the risks associated with TerraUSD, a stablecoin that was designed to maintain a price of $1.

Also Read: Investors Losing Faith In Crypto As Bitcoin, Ethereum Experience Historic Exodus

When the coin lost its peg in May 2022, it resulted in a chain reaction that wiped out around $40 billion in market value, causing some investors to lose their life savings.

The Justice Department's investigation covers similar ground as the SEC's lawsuit.

Investigators are said to be looking into the relationship between Chai, a South Korean payment app, and the underlying blockchain that Terraform Labs created to power TerraUSD.

Specifically, they are questioning whether Chai used the Terraform blockchain for payments, as Kwon had claimed. The SEC alleged Kwon misled investors by claiming that Chai transactions were processed on Terraform's blockchain, when in fact the app used more traditional technology.

Chai Corp., the startup behind the app, had previously said that it stopped using Terraform's blockchain technology and digital assets to process its payments by 2021.

If Chai had indeed used the Terraform blockchain for payments, it would have been a rare instance of blockchain technology being used for a real-world application.

The SEC's lawsuit claimed Kwon's false claims about real-world usage of the blockchain duped investors into buying Terraform's cryptocurrencies.

Read Next: Bitcoin, Ethereum And Doge Soar After US Gov's SVB Bailout ⁠— Experts Expect Increased Investor Interest

Photo: Terra screenshot 

Market News and Data brought to you by Benzinga APIs
Posted In: CryptocurrencyGovernmentNewsLegalGlobalMarketsBlockchainDo KwonFederal Bureau of InvestigationJustice DepartmentSecurities and Exchange CommissionSouthern District of New YorkStablecoinTerraform Labs Pte. Ltd.TerraUSD stablecoin
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...