S. Korean Authority Sets Probe on Tera-linked Financial Service

The Financial Supervisory Service (FSS) of South Korea has announced plans to conduct on-site inspections on companies that provided financial services to the Terra Labs’ project in the light of the LUNA and UST implosion two weeks ago.

The announcement came through Chan-woo Lee, a senior vice president of the FSS, on Tuesday, May 24, 2022, at the meeting of the Enactment of the Digital Asset Framework Act and Emergency Inspection of Coin Market Investor Protection Measures, held at the National Assembly Hall.

Lee said:

The possibility of the Terra crisis affecting the financial market is still low, but in order to prevent risk transfer to the financial market, on-site investigations were conducted on some companies that provide financial services in connection with the issuer or related virtual assets. We will conduct an inspection.

The FSS also said it would conduct a research service to analyze the risk of virtual assets and classify them by risk characteristics to guide future exchange listing evaluations.

On May 11, 2022, LUNA, the native cryptocurrency of Terra Labs, crashed from $119 to $0.000002, losing 100% of its value within 48 hours. Its stablecoin, UST, also depreciated from the $1 peg to $0.02. A report from Bloomberg noted that investors lost over $60 billion to the collapse of these projects.

At the World Economic Forum Annual Meeting, the president of the International Monetary Fund (IMF), Kristalina Georgieva, described the collapse of Terra-Luna as a “multi-level pyramid scheme.”