Multiple current and past employees at Terraform Labs have been put on a no-fly list after the South Korean company’s so-called stablecoin TerraUSD collapsed in May to the tune of $40 billion and its sister token, Luna, tanked, triggering a chain reaction and selloff across crypto markets.
Several retail investors claimed on social media that they had been wiped out and lost everything.
TerraUSD (UST) is an algorithmic stablecoin that was supposed to be pegged 1:1 to the U.S. dollar. Built on the Terra blockchain, it gained a reputation as the most scalable stablecoin and could be used in conjunction with Luna, Terra’s non-stablecoin crypto, or as a standalone token.
The $1 peg to U.S. government Treasuries, cash and other dollar-debt was supposed to make stablecoins such as UST and Luna easy to sell during times of market stress – until they failed to live up to the hype and helped send the entire crypto market tumbling.
When the dollar peg broke in May, investor confidence evaporated fast. TerraUSD (UST) was trading at $0.00840294 as of this writing. Terra (LUNA) was trading at $2.12, down 88.8 percent from an all-time high of $18.87 on May 28, 2022.
An official at South Korea’s Supreme Prosecutors’ Office said multiple Terraform Labs staff had been put on a no-fly list while the company is under investigation.
The No. 1 cryptocurrency Bitcoin is trading at $21,484.06, having lost about half of its value since early May, when TerraUSD began collapsing.
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The collapse of the Terra stablecoin is also being blamed for causing problems at U.S.-based crypto lender Celsius, which suspended withdrawals this month, and Singapore-based crypto hedge fund Three Arrows Capital, which is considering options including selling assets and a bailout by another company, Reuters reported.
A special financial crimes unit in the South Korea prosecutors’ office launched an investigation in May on behalf of 81 investors who allege that “Terraform founders and the company deceived investors with their flawed algorithmic coins”, according to the documents.
“Dozens” of former and current Terraform Labs employees are subject to the travel ban, the prosecutor’s office said.
Daniel Hong, a former employee of Terraform Labs, tweeted that he can’t fly to New York because of the travel ban. “People being treated as potential criminals like this is absolutely outrageous and unacceptable,” he said, adding that anyone “willing to co-operate would no longer want to after this madness”.
A U.S. court has ordered Do Kwon, the Stanford-educated co-founder of Terraform Labs, to comply with subpoenas from the Securities and Exchange Commission regarding the sale of potential unregistered securities, Financial Times reported.
At its height, Luna’s total value skyrocketed to more than $40 billion, and Kwon referred to investors and supporters as “Lunatics.”
Image: LUNA/USDT One-day chart on May 11, 2022 showing the key levels fall by about 99 percent. (Source: Tradingview)