Employees of Terraform are being investigated in South Korea over the UST collapse

All Terra employees have been summoned by a Prosecutor's Office team to investigate if the collapse was caused by pricing manipulation.

Terra LUNA
Terra LUNA

South Korean authorities are summoning all workers of Terraform Labs, which produced Luna Classic (LUNC) and TerraUSD, as part of their investigation into the Terra ecosystem's collapse earlier this month (UST).

According to a local news report, the Seoul Southern District Prosecutors' Office's joint financial and securities criminal investigation section has subpoenaed all Terraform Labs workers.

In addition, reports say that one of the employees testified that there were internal doubts about Terra's long-term viability.

According to an unidentified employee involved in building the tokens in 2019, Terra founder Do Kwon was told that the tokens may collapse at any time.

Furthermore, the employee noted that the CEO chose to ignore the warnings and force the launch of the tokens.

According to the source, the tokens were granted despite the failure of a test model within the firm.

South Korean officials are conducting an inquiry to see if there was any deliberate price manipulation of LUNC or UST.

Authorities are also investigating whether the coins were listed on domestic markets in accordance with proper processes.

Investigators believe Terra's tokenomics were flawed because UST was not backed by any reliable collateral and had no long-term business plan.

In an interview with Protocol after the collapse, Jeremy Allaire, CEO of Circle, which issues the second-largest stablecoin USDC, said Terra was a "house of cards" that was doomed to fail.

The Financial Services Commission in South Korea estimates that 280,000 investors were affected by the Terra bankruptcy. A class-action lawsuit has been launched against Do Kwon and Terra co-founder Shin Hyun-Seung by some of the impacted investors.

Lawmakers also want Do Kwon to testify in front of the National Assembly of the South Korean parliament about the fall. The Luna Foundation Guard, a non-profit that supports the Terra ecology, has had its assets frozen by the police.

Meanwhile, in the aftermath of the Terra debacle, regulators are attempting to strengthen oversight of crypto exchanges in the country.

The current development coincides with Do Kwon's Luna 2.0 efforts to resurrect the Terra biosphere. The new token, which went live on May 28, crashed by over 80% shortly after it was released.