The U.S. Department of Justice is reportedly investigating the collapse of the TerraClassicUSD (USTC) stablecoin, which cost the Terra ecosystem $40 billion last May.
Two of the department's agencies the FBI and the U.S. Attorney's Office for the Southern District of New York have interrogated former Terraform Labs staffers in recent weeks, The Wall Street Journal reported on March 13. The investigation involves grounds similar to the SEC's Feb. 16 lawsuit against Terraform Labs and its founder Do Kwon, according to people familiar with the matter.
Investigators asked about the relationship between Chai, a South Korean payments platform, and the Terra blockchain, which is operated by the USTC. In its filing, the SEC alleges that Kwon misled investors into believing that Chai transactions were processed on the Terra blockchain.
The SEC also accused Kwon in its lawsuit of misleading investors about the risks of an algorithm-based stablecoin designed to be pegged 1:1 to the U.S. dollar. It was not immediately clear what specific charges the Justice Department might pursue. An investigation does not necessarily mean that charges will be laid.
Since the collapse, Kwon has reportedly left South Korea for Singapore, Dubai and now Serbia, where he is believed to be now, according to South Korean officials. Two South Korean authorities were recently sent to Serbia to find Kwon, but their search attempts were unsuccessful.
However, despite South Korean prosecutors issuing an arrest warrant for Kwon on Sept. 14 and global law enforcement agency Interpol issuing a red notice on Sept. 26, Kwon said he was not "at large." Kwon told podcast Laura Shin in October that he had not seen a copy of the South Korean arrest warrant and continued to deny the fraud allegations on social media.
Meanwhile, New York prosecutors are investigating a series of chat group investigations involving former members of Jump Trading, Jane Street and Alameda Research, Bloomberg reported on March 13. Alameda filed for bankruptcy in November along with FTX. The probe is reportedly looking into whether the TerraUSD stablecoin project is involved in market manipulation tactics.
