Seoul authorities launch an official investigation on the TerraUSD crash

• Terraform Labs employees have been summoned by South Korean prosecutors in a bid to establish the exact cause of the collapse of Terra assets
• The investigators have also tightened up scrutiny on exchanges to make sure investors are protected from the same fate that befell Terra and its native tokens

South Korean authorities have reportedly launched a full-scale investigation to find the exact reason for the collapse of algorithmic stable coin UST and its sister token LUNA. The investigation is being conducted by the joint financial and securities crime investigation team from the Seoul Southern District Prosecutors Office.

Investigators probing to determine if there was price manipulation

The investigation team seeks to find from the Terra lab employees if the project’s founder, Do Kwon, intentionally manipulated prices. It also looks to establish if the tokens went through proper listing procedures. This comes after the digital assets lost close to 97% of their value and washed away nearly $40 billion in investors’ money.

According to a report by a South Korean news outlet JTBC, the employees who had been involved in the project since its inception claimed to have warned their founders of an imminent collapse after the pilot model failed, but CEO Do Kwon still went ahead with the launch.

The investigators also want to establish if the firm’s executives neglected UST’s design flaws that may have eventually caused the catastrophic crash. Several Terra investors filed a class-action lawsuit against Terra executives for records of marketing material and user accounts.

The UST coin lost its 1:1 peg to the United States Dollar and is currently valued at a fraction of the USD. To salvage the terra ecosystem, Terra lab launched a new blockchain Terra 2.0 during the weekend, dropping the stable coin entirely and renaming original LUNA tokens LUNA CLASSIC (LUNC).

New LUNA token recovers after enduring a rough start

Following the launch of the new Terra iteration, the ecosystem’s token LUNA peaked at $19.53 but has since plunged. The token was, at the time of writing, changing hands at $8.50 against the dollar – up 43.96% on the day.

The anxiety among investors has heightened volatility in the crypto market. Meanwhile, regulators around the world are keeping a close eye on the situation. Case in point, South Korea is tightening regulations to make sure that the cause for the fallout is noted, leaving no chance for a similar occurrence in the future. 

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