S. Korea Terra Investigation Moves to Bar Employees From Leaving Country; New Lawsuit Targets VC Backers

Recent reports have confirmed that South Korea has blocked Terra Labs’ current and former employees from leaving the country, as prosecutors level up their investigation into the last month’s stablecoin debacle.

Bloomberg noted that travel restrictions have been put in place for “officials linked to the stablecoin’s collapse.”

15 employees reportedly face restrictions

Details as to how many employees have been named in the notice are currently unconfirmed. However, Yonhap News claims that about 15 people, including Anchor’s former project developers, are reportedly under travel restrictions.

“Departure bans are normally imposed to have them included for questioning,” a source to Bloomberg remarked.

According to Daniel Hong, Terraform’s former developer, ‘every ex-terra employee that he contacted was banned from leaving the country,’ including ‘people who left the platform back in 2019-2020.’

He also argued on Twitter that “people being treated as potential criminals like this is absolutely outrageous and unacceptable.”

With that, Hong also highlighted that none of the employees were notified about the restrictions beforehand, which is usually done to prevent absconding under the domestic legal framework. Despite that, he noted that he will cooperate with the probe.

Fresh trouble for Terra with lawsuit against VCs

Up until now, the South Korean authorities have been investigating if charges of a Ponzi scheme can be brought against Terraform Lab’s CEO, Do Kwon. The co-founder is also being investigated for tax evasion and money laundering charges, with fresh reports claiming that invalidation of his passport is also a possibility. This is especially forthcoming as a former employee had claimed that Kwon secretly stamped the coins and sold them to institutions to raise huge sums of money, as per a report by JTBC.

Meanwhile, in a separate probe, a Terraform Labs employee was under scrutiny for alleged embezzlement of Bitcoin.

That said, the US Securities and Exchange Commission is also looking into possible violations of federal investor-protection regulations in the marketing of TerraUSD stablecoin before its collapse.

In the latest, a fresh securities fraud class action can reportedly bring six crypto venture capital firms in for questioning. Reuters reported on June 22 that VCs that supported Terra tokens before its meltdown is alleged to have made ‘false promises about guaranteed returns and algorithmic stability.’

The new lawsuit was reportedly filed by investor Nick Patterson against CEO Do Kwon and research head Nicholas Platias in federal court last Friday. 

The complaint argues that the VCs like Jump Trading LLC, Tribe Capital, and Three Arrows Capital Pte Ltd, misguided Terra investors by being “agents of Terraform, acting on Terraform’s behalf.”