A court in Seoul issued an arrest warrant for Do Kwon, the CEO, and founder of TerraForm Labs, following an ongoing investigation into the collapse of the Terra ecosystem. As per a new report, the warrant was reportedly issued in relation to a violation of capital market rules and targets five more individuals who are currently residing in Singapore. Terraform Labs’ algorithmic stablecoin UST and its sister token LUNA imploded dramatically in May this year, resulting in the wipeout of at least $40 billion (roughly Rs. 3,18,776 crore) worth of investors’ wealth.
As per a report by Bloomberg, a court had issued arrest warrants for the Terra founder and five other individuals. The warrants alleged that Kwon and his accomplices violated Korean capital markets law, according to the report that cites a text message from the prosecutor’s office.
After briefly becoming the fifth-largest cryptocurrency by market cap, the blockchain’s ecosystem imploded in May when investors lost confidence in the dollar peg of the network’s UST stablecoin. Since UST was not backed by real dollars and instead held its value through an algorithmic relationship with LUNA, the loss of confidence resulted in a death spiral that sent the price of LUNA and UST down to fractions of a penny.
Terra’s collapse triggered investigations from the US Securities and Exchange Commission (SEC), Korean regulators, as well as several class-action lawsuits.
In July, South Korean officials raided at least seven cryptocurrency exchanges in connection with investigations into Terraform Labs. Several lawsuits also claim that Kwon and his company defrauded investors and accused the firm of running a Ponzi scheme.
Terra 2.0, the blockchain that Kwon’s company Terraform Labs launched after the collapse of the original Terra blockchain, has been hit hard in response to the news of the issuing of the arrest warrants. The network’s native LUNA token has dropped more than 36 percent over the past 24 hours.