US DOJ Probes the Collapse of Terra’s Algorithmic Stablecoin

The American Department of Justice has started a probe into the collapse of Do Kwon’s stablecoin, TerraUSD. The Federal Bureau of Investigation and the Southern District of New York have begun questioning former members of Do Kwon’s crypto firm, Terraform Labs, according to a report from the Wall Street Journal.

On-the-run ex-Terra Labs CEO Kwon risks further charges from U.S. regulators if DOJ finds any indicting information from the recent probe. The FBI and SDNY have questioned some of the members of Kwon’s Terraform Labs team and will interview others in the coming weeks.

Terraform Labs’ stablecoin UST depegged in May, causing a ripple effect on crypto firms and investors. The Terra collapse caused a loss of over $40 billion, wiping out users’ live earnings. Terraform Labs and Do Kwon faced a similar charge as this from the Securities and Exchange Commission last month.

DOJ Questions Relationship Between Chai and TerraUSD

The Justice Department has questioned the relationship between Chai and the blockchain used to power TerraUSD. Chai, a South Korean payment app, was alleged to be using the TerraUSD blockchain.

Kwon fronted the concept of TerraUSD having real-life applications due to its use by Chai to investors, convincing them of the idea. However, according to formal investigations, Chai never used the blockchain and used a more traditional one.

Chai stated in 2021 that it was no longer using Terraform Labs’ blockchain or any of its digital assets to process payments. This was in contrast to Kwon’s claims of the payment platform using its blockchain.

Do Kwon Still On The Run

Despite prosecutors in South Korea getting an arrest warrant and issuing a red notice on Kwon, they are yet to apprehend the former Terraform Labs CEO. Prosecutors are speculating he is in Serbia after fleeing from Singapore months after the Terra capitulation.

Kwon, however, stated that he is not on the run and has not seen an arrest warrant from South Korea. He noted that he wanted to keep his location private, saying that it would be impossible to live there if he disclosed the place.