Co-founder of Terra may be accused of operating a financial pyramid

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A group of investors who lost money with the collapse of Terra filed a lawsuit against the founders of Terraform Labs.

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One of the founders of the collapsed Terraform Labs network, Do Kwon, may be presented criminal charges for participating in a financial pyramid scheme. South Korean prosecutors are actively investigating the case to see if they can bring further charges of creating a Ponzi scheme.

On Thursday, a group of South Korean investors filed a lawsuit against Kwon and his co-founder Daniel Shin, accusing the founders of the company of fraud and other financial irregularities related to the collapse of Terra. The Seoul Southern District Prosecutor’s Office, which launched a pre-investigation check, instructed its financial crimes team to find out if Kwon intended to develop a pyramid scheme by promoting unsustainable stable yields of UST under the Anchor protocol.

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According to a spokesman for a South Korean law firm that represents sued investors, the Anchor Protocol could be considered a Ponzi scheme because it is unsustainable, requiring new investors to keep getting rich.

Also, as reported, on May 24, a joint special meeting will be held at the National Assembly of South Korea on the LUNA incident. Parliamentarians and officials will have to discuss additional measures to protect investors in the exchange of virtual assets and, if necessary, amend the law on digital assets.

Recall that earlier Tether CTO Paolo Ardoino (Paolo Ardoino) said that he does not see fraud in the collapse of the Terra ecosystem and the UST stablecoin. The expert believes that the problem is in the poor architecture of the project.

Source: Bits

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