The collapse of the TerraUSD (UST) stablecoin has led to multiple investigations, including the U.S. Justice Department’s probe. The Wall Street Journal reported that the department is investigating last year’s collapse of the stablecoin, and the Federal Bureau of Investigation and the Southern District of New York have questioned former team members of the company behind it.
The DoJ’s investigation of UST
The specifics of the Justice Department’s investigation are unclear, but prosecutors could drop the case without filing charges. If Terraform Labs and Do Kwon are found responsible, they could most likely face criminal charges, which could lead to a prison sentence.
This investigation comes almost a year after the collapse of Terraform Labs, and regulatory authorities are still pursuing its unstable stablecoin UST.
The SEC’s allegations against Terraform Labs and Do Kwon
The U.S. Securities and Exchange Commission sued Terraform Labs and its CEO Do Kwon for a multi-billion dollar fraud involving the algorithmic stablecoin TerraUSD (UST) and said Kwon transferred more than 10,000 bitcoin from the Terra ecosystem to a wallet that wasn’t on a digital exchange when UST started crashing last May.
The SEC’s suit reiterated the regulator’s stance that stablecoins are securities and their sale, if not registered with the SEC, violates federal securities laws.
It also took aim at Kwon for moving large amounts of bitcoin from the Terra ecosystem into a cold wallet as UST collapsed. Ultimately, the SEC said Terraform and Kwon misled investors with false promises of high returns.
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 $120.
Nearly a year since Terraform Labs first collapsed, regulatory authorities are still pursuing its unstable stablecoin TerraUSD (UST).
Do Kwon’s location is unknown
Do Kwon, who is a South Korean, is the subject of an Interpol Red Notice and believed to be living in Serbia. Last week, Singapore police started an investigation into Terraform Labs, which was based in the city-state before the $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 collapse of TerraUSD has led to multiple investigations, including the U.S. Justice Department’s probe. The DoJ’s investigation covers similar ground to the lawsuit filed by the SEC last month.
If Terraform Labs and Do Kwon are found responsible, they could face criminal charges and prison sentences. The case is ongoing, and the investigation continues.
