According to South Korean media reports a special investigative and prosecutorial specialized financial crimes unit has been tasked with investigating last week’s collapse of the Terra blockchain’s main cryptocurrencies.

As per SBS News reported on Wednesday a group is designed to prosecute securities fraud and unfair trading schemes including investigate the methods Terraform Labs used to attract investors. The team consists of members from various financial prosecutors and employees regulators, from the Financial Services Commission and the Financial Supervisory Service. Along with core members Terra team including co-founders Do Kwon and Shin Hyun-seong all are potentially at risk.

In the community many hold Kwon responsible for the collapse of the project. South Korean investors will also bring a civil lawsuit against Kwon for damages, as well as a criminal lawsuit for fraud against him. Additionally, they will push for Kwon's assets to be seized.  The founder Do Kwon had to faces hefty tax fines. Last week a resident of Singapore filed suit against Kwon week on behalf of at least 1,000 other residents who invested in the Terra ecosystem. This lead to Kwon’s legal troubles extending beyond South Korea.

 According to Edaily, the investigation centered on the formation of the Luna Foundation Guard (LFG) and a relocation of the company's headquarters for tax purposes. 

Korean news outlet SBS News reported that the Terra case would be the first the resurrected Securities Crimes Joint Investigation Team would investigate. A representative from the team told SBS News that, “The Terra case caused severe damage to average citizens which led us to designate this as the first investigation.” However, the severity of the Terra situation is illustrated by the fact that it is the first case the investigators will handle in two years.

The team handled high-profile cases that lead to earn the moniker The Grim Reapers. Lime Asset Management embezzlement scandal which was $1.2 billion was the largest cases the team handled. Case is set to be reopened and the team was disbanded before the investigation was complete. The unit earned nickname "Yeouido Grim Reaper," due to accuracy and clinical approach after the Yeouido financial district of Seoul. According to SBS News It was being disbanded two years ago after which coming back into operation to investigate Terra. Even though the legal entity relocated to Singapore, LFG's management is still carried out by domestic companies and residents in th south Korea. According to the report Korean tax authorities are also preparing a separate 100 billion won fine to LFG.

Reports by Culture Journal Moonwha Ilbo in May cite the Capital Markets Act as the legal framework for the prosecution of violations of the crypto industry. However, crypto-specific laws might ultimately replace the Capital Markets Act.

About Terra (LUNA) :

The Terra (LUNA) blockchain operates at layer-1. By market cap both Luna and Terra USD (UST) were in the top ten cryptocurrencies until UST's sale on May 8 sparked a death spiral that has cost billions of dollars. On May 8, Terra had a market cap of $24.8 billion. According to CoinGecko, now market cap is $959 million. The Terra ecosystem fell into chaos last week after its stablecoin offering, TerraUSD (UST), de-pegged which lead the price of Terra’s native token Luna to fall in value as supply soared to protect the peg. Kwon is now proposing forking Terra to revive the network.

Indrani bose

CBW - External Analyst

INDIA