Korean Prosecutors Summon Terraform Labs Employees About UST Collapse

South Korean prosecutors have summoned all Terraform Labs’ employees to look into the collapse of TerraUSD stablecoin, according to local news report.

The Seoul Southern District Prosecutors Office’s joint financial and securities crime investigation team has summoned Terraform employees, according to JTBC report.

One employee, with involvement in the initial development of the Terra blockchain in 2019, has reportedly already testified. According to employee, whose name was not disclosed, there were concerns about UST’s design from some within Terraform Labs team.

UST dramatically collapsed earlier this month, wiping out over $40 billion of value for investors. UST’s price, which was supposed be pegged 1:1 with USD, fell below 10 cents and still hasn’t recovered. It is now trading at around 2 cents, according to CoinGecko. UST’s sister token, Terra Classic (LUNC, formerly known as LUNA), lost almost its entire value and is now trading at a tiny fraction of a cent.

In attempt to rectify the situation, Terraform Labs launched a new Terra blockchain, called Terra 2.0, over the weekend. UST is not part of the new blockchain.

According to the JTBC report, prosecutors are trying to get a bigger picture view, including whether CEO Do Kwon and other Terraform Labs executives neglected UST’s design flaws. Prosecutors are reportedly also looking into whether local crypto exchanges went through a proper listing review before listing UST or LUNA.

Earlier this month, Korea’s two financial regulators, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), launched “emergency inspections” into local crypto exchanges to improve investor protection.