The ongoing crypto crash has brought many investors back to earth. In the case of current and former Terraform Labs employees, it literally keeps them grounded.
Dozens of past and present employees of the company behind two notorious cryptocoins, terraUSD and Luna, have been banned from leaving South Korea, according to multiple reports. The travel ban comes amid a deepening investigation into the sudden collapse of terraUSD, a so-called “stablecoin” algorithmically pegged to the value of the US dollar. Turns out it wasn’t that stable.
Some of the first hints of the travel ban surfaced on Twitter, where Daniel Hong, a former Terraform Labs staff posted that he was not allowed to board a scheduled flight to New York City. Korean outlet JTBC reported the same day that another person, one of the main designers behind terraUSD, was under a travel ban.
Then on Tuesday, Seoul’s South District Attorney’s Office confirmed that a travel ban on dozens of current and former Terraform workers was in effect, according to a Financial Times report. Bloomberg also reported that “officials linked to the collapse of the stablecoin” were banned from air travel, citing a prosecutor’s office. Prosecutors did not immediately respond to Gizmodo’s request for comment.
South Korea’s ongoing investigation into the collapse of Terra/Luna is being led by a special financial crime unit nicknamed the “Reapers of Yeuido,” after Seoul’s financial district, Yeuido (think South Korean Wall Street). The financially focused investigative team gained notoriety for its role in hundreds of arrests in previous cases, including major embezzlement scandals. In the case of Terraform Labs, the “Reapers” are investigating possible fraud and other financial wrongdoing by the company, its employees, and its founder, Do Kwon.
The investigation came after two official complaints were filed by a group of 81 investors. “Terraform’s founders and company have fooled investors with their flawed algorithmic coins,” the Financial Times said in the complaint documents.
Terra has frequently been touted in advertisements as “fiat-backed,” “stable,” and “secure,” which has caused crypto platform Binance to face legal troubles of its own. Terra was designed to never fall below $1 in a trading system with the Luna coin. However, as early as May, the terraUSD algorithm failed and the currency was decoupled from the US dollar. A death spiral of its sister coin Luna soon followed. The value of both fell to virtually zero and investors lost everything they had invested.