The co-founder of the now-defunct stablecoin issuer, Terraform Labs, Do Kwon, is the subject of an arrest request from a South Korean court.
Five more people were named in the warrant, according to Bloomberg which cited a text message from the prosecutors’ office. According to the report, they are accused of breaking the Capital Markets Act.
The warrant comes four months after the collapse of the $40 billion Terra ecosystem and its algorithmic stablecoin (UST), which was the first domino to fall in this year’s crypto winter.
What you should know
- The collapse of Terra led to inquiries in South Korea and the US as well as increased regulatory scrutiny of stablecoins, which are digital tokens backed by assets like the dollar.
- Stablecoins make it simpler to shift money onto cryptocurrency exchanges and are a popular vehicle for investors looking to lodge capital away from more volatile coins.
- In July, prosecutors raided the home of Terraform Labs co-founder, Daniel Shin as the probe into allegations of illegal activity behind the collapse of TerraUSD deepened.
- The contagion that followed caused an industry-wide fallout, with crypto lender Celsius Network and crypto broker Voyager Digital filing for bankruptcy as the value of digital assets slumped by more than 50% from their highs.
- Another company that declared bankruptcy when the amount of its exposure to the Terra network was revealed was the Singapore-based hedge fund, Three Arrows Capital. With billions in debt to creditors, the collapse of Three Arrows created a trail of shaky loans throughout the cryptocurrency sector.
- Do Kwon continued to develop a new version of Luna after the incident. Following the release of the warrant, the cost of the new token dropped as much as 45%, to $2.40, according to statistics from CoinGecko.
- In his first public interview last month, Kwon had maintained that he is cooperating with authorities. Terra didn’t immediately respond to a request for comment.
Kwon also reiterated his commitment to the Terra ecosystem and its re-launched terra token (LUNA). The token has slumped by -27.14% at the time of writing.
