US reportedly probes collapse of TerraUSD stablecoin

Among other topics, investigators have asked about the relationship between Chai, a South Korea-based payment platform, and the Terra blockchain on which TerraClassicUSD operated

The US Department of Justice (DoJ) is supposedly looking into the collapse of the TerraClassicUSD (USTC) stablecoin, which contributed to a $40b wipeout in the Terra ecosystem in May 2022.

Two agencies within the department — the Federal Bureau of Investigation (FBI) and the U.S. Attorney’s Office for the Southern District of New York — have questioned former employees at Terraform Labs in recent weeks, as per a report in The Wall Street Journal report on March 13.

The investigation covers similar charges filed against Terraform Labs and its founder Do Kwon by the U.S. Securities Exchange Commission on February 16, said people familiar with the matter.

Among other topics, investigators have asked about the relationship between Chai, a South Korea-based payment platform, and the Terra blockchain on which TerraClassicUSD operated.

The Securities Exchange Commission claimed in its filing that Kwon misled investors into believing that Chai transactions were processed on the Terra blockchain.

The Securities Exchange Commission in its lawsuit also accused Kwon of misleading investors about the risks associated with the algorithmic-based stablecoin, which is designed to be pegged 1:1 to the U.S. dollar.

It is not clear what particular charges the DoJ is possibly pursuing. The probe does not necessarily mean that charges will be filed.

Since the collapse, Kwon reportedly left South Korea for Singapore, Dubai, and now Serbia, where he is now supposed to be, as per South Korean officials. Two South Korean authorities were recently sent to Serbia to find Kwon but were not able to find him.

Kwon, though, claims he is not ‘on the run’ in spite of the South Korean prosecutors issuing Kwon an arrest warrant on September 14 and a red notice filed by Interpol on September 26.

Kwon told podcaster Laura Shin in October that he has not seen a copy of the South Korean arrest warrant, and has continued to reject fraud allegations on social networks.