Terraform Labs and its executives have been under increased scrutiny from regulators and authorities because of the collapse of LUNA and TerraUSD (UST). The collapse of these tokens caused massive losses for investors, and authorities are narrowing in to establish whether the fall was caused by fraudulent dealings.
Korean police raid Daniel Shin’s home
The probe into the collapse of the UST stablecoin and LUNA token is deepening. A report by Bloomberg said that the Seoul home of one of the co-founders of Terraform Labs, Daniel Shin, has been raided.
The report added that the mobile payment application Chai, created by Shin in 2019, was also raided. Chai is a mobile payments app using the Terra blockchain to support cheap transactions for local businesses in Korea with bank accounts.
Shin, alongside Do Kwon, launched Terraform Labs in 2018. The objective of launching Terraform Labs was to disrupt leading payment platforms such as PayPal. Towards the end of 2018, the duo secured $32 million in funding, and in 2019, the company raised another $62 million in an initial coin offering.
Shin resigned from Terraform Labs in March 2020. He even reduced his stake in Terraform Labs to concentrate on Chai. Do Kwon later took charge of the entire operations of Terraform Labs.
According to a spokesperson in the Seoul Southern District Prosecutors Office, a raid was done on Shin’s home due to his link with Terraform Labs. The spokesperson added that two other companies linked to the Chai application were raided, but additional details on this were not provided.
South Korea’s investigation of Terraform Labs
Terraform Labs is the company behind the troubled Terra blockchain. Terra recorded increased adoption within the decentralized finance (DeFi) sector, with LUNA being one of the best utility tokens before its collapse.
Before it collapsed, LUNA had a market cap of $60 billion, and its downfall led to losses for both individual and institutional investors. Three Arrows Capital went bankrupt due to a $200 million stake in Terra LUNA. Some investors have also filed a lawsuit after losing $8 million because of the LUNA/UST collapse.
Earlier this week, South Korean authorities raided seven local cryptocurrency exchanges and sized materials linked to Terra. The materials seized during the raid will be analyzed to determine the damages suffered by investors because of their exposure to Terra.
Prosecutors are also investigating if Do Kwon avoided taxes by moving profits from cryptocurrency investments to an offshore account. He is reportedly living in Singapore while these inquiries are ongoing. South Korean officials have also placed a travel ban on important members of Terraform Labs.
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