The ongoing crypto crash has brought a lot of investors back down to earth. In the case of current and former Terraform Labs employees, it’s keeping them literally grounded.
Dozens of past and present staff from the company behind two notorious crypto coins, terraUSD and Luna, have been barred from leaving South Korea, according to multiple reports. The travel ban comes amid an intensifying investigation into the sudden collapse of terraUSD, a so-called “stablecoin” algorithmically pegged to the value of the US dollar. It turned out not to be so stable.
Some of the first hints of the travel ban emerged on Twitter, where Daniel Hong, a former Terraform Labs employee posted that he hadn’t been allowed to board a scheduled flight to New York City. Korean outlet JTBC reported the same day that another person, one of the primary designers, behind terraUSD was under a travel ban.
Then, on Tuesday, the Seoul Southern District Prosecutors’ Office confirmed a travel ban was in effect for tens of current and former Terraform workers, according to a report from the Financial Times. Bloomberg likewise reported that “officials linked to the stablecoin’s collapse” were barred from air travel, citing an official with the prosecutor’s office. The prosecutor’s office did not immediately respond to Gizmodo’s request for comment.
South Korea’s ongoing investigation into the Terra/Luna collapse is being led by a special financial crimes unit, nicknamed the “Grim Reapers of Yeuido,” after the Seoul financial district, Yeuido (think South Korean Wall Street). The financial-focused investigation team gained renown for its role in hundreds of arrests in past cases including large embezzlement scandals. In the case of Terraform Labs, the “Grim Reapers” are looking into possible fraud and other financial violations on the part of the company, its employees, and its founder, Do Kwon.
The probe came after the filing of two official complaints from a group of 81 investors. “Terraform founders and the company deceived investors with their flawed algorithmic coins,” read the complaint documents, according to an earlier, Financial Times report.
Terra was frequently touted as “fiat-backed,” “stable,” and “safe” in advertisements which crypto platform, Binance, is facing its own legal troubles over. Terra was designed to never drop below a $1 value in a swap scheme with the Luna coin. However, back in May, terraUSD’s algorithm failed and the currency became de-pegged from the U.S. dollar. A death spiral of its sister coin, Luna, soon followed. The value of both fell to basically nothing and investors lost everything they had put in.