Media: South Korean authorities sue Terraform Labs employees

South Korean prosecutors are calling to testify all employees of the Terraform Labs cryptocurrency platform behind the project that survived the collapse of Terra.

A business leads Seoul Southern District Prosecutor’s Office, which investigates crimes related to finance and securities. Law enforcers are analyzing: could there have been deliberate market manipulations with the UST and Luna Classic (LUNC) rates? Did these crypto assets meet the requirements for listing on trading floors?

Investigators claim that the mechanism of the LUNA coins was initially faulty and they had no other way but to collapse. The mechanism could not cope with fluctuations in the cost and payment of interest, the prosecutor’s office is sure.

In mid-May, investors filed a class action lawsuit against Terraform Labs CEO Do Kwon and co-founder Shin Hyun-seun, accusing them of fraud. Plaintiffs said they lost $44 million in funds after LUNC fell 99% and UST lost its pegging to the US dollar 1:1.

Earlier media reported that Terraform Labs closed its South Korean branch a few days before the collapse of LUNC and UST. On charges of tax evasion, the South Korean tax authority fined Terraform Labs $78 million.

Information about the ongoing investigation came after the launch of the new Terra 2.0 network, designed to revive the collapsed Terra ecosystem. The launch took place on May 28, a day later than the scheduled date. The old network was named Terra Classic and the old coins became known as LUNC. However, soon after the launch, the rate of the new LUNA coin fell by 70%.

Tether CTO Paolo Ardoino believes that the Terra project was not a scam, just that its structure was not well developed and the reserves were not well planned.