The controversial founder of Terraform Labs, Do Kwon, is at the center of the investigation, despite being believed to be hiding out in Serbia.
It is reported that the Department of Justice of the United States is investigating the failure of the stablecoin TerraClassicUSD (USTC), which contributed to the elimination of $ 40 billion in the Terra ecosystem last May.
Two agencies – the Federal Bureau of Investigation and the US Attorney’s Office for the Southern District of New York – have interviewed Terraform Labs employees in recent weeks, according to a March 13 report from Wall Street log. The investigation covers similar ground to the lawsuit filed against Terraform Labs and its founder Do Kwon by the US Securities Exchange Commission on Feb. One of the topics asked by the researchers was the relationship between Chai, a payment system based in South Korea, and the Terra blockchain that the USTC is working on.
The SEC alleged that its filing with Kwon misled investors into believing that Chai’s transactions were being processed on the Terra blockchain. The SEC in its lawsuit accused Kwon of misleading investors about the risk of the stablecoin based on the algorithm, which was made to be 1:1 to the US dollar.
It is unclear what charges the Justice Department may pursue. The investigation does not mean that charges will be filed.
Since the collapse, Kwon has reportedly left South Korea for Singapore, Dubai and now Serbia, where he is believed to be now, according to South Korean officials. Two South Korean officials were recently sent to Serbia to find Kwon but failed in their efforts.
However, Kwon says he is “not on the run” even though South Korean prosecutors have issued an arrest warrant for Kwon on September 14 and the Red Notice of Interpol, the international law enforcement agency, issued on September 26. Kwon told podcaster Laura Shin in October that he had not seen the South Korean arrest warrant and has continued to deny the fraud allegations on social media.
In the meantime, it is reported that New York prosecutors are investigating the investigation of the research group of the former members of Jump Trading, Jane Street and Alameda Research, Bloomberg reported on March 13. Alameda filed for bankruptcy alongside FTX in November.
The investigation will seek to determine whether market manipulation is involved in the operation of the TerraUSD stablecoin. Cointelegraph contacted Terraform Labs but did not immediately receive a response.
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