South Korean authorities are currently investigating Terraform Labs and its employees on several charges including tax evasion and market manipulation.
Terraform Labs, the parent company behind the collapsed Terra ecosystem, is currently under multiple investigations from the South Korean authorities.
The latest investigation revolves around the alleged embezzlement of Bitcoin (BTC) from the company’s treasury. According to a report published in a local daily, the Seoul Metropolitan Police Agency received an intelligence tip last month informing them of possible embezzlement of BTC by one of the employees of the firm.
The police stated that the investigation into the alleged embezzlement of BTC from the company’s treasury had no direct connection with tainted co-founder Do Kwon and they are investigating individual embezzlement charges at this point.
Authorities managed to freeze the stolen funds with the help of a crypto exchange until the investigation is complete. However, the amount of the stolen funds wasn’t disclosed.
Luna Foundation Guard (LFG), a fund set up by the company that held over $3 billion in Bitcoin reserves, became the focus of interest in the aftermath of the collapse. The BTC fund was used to help balance the algorithmic stablecoin Terra USD (UST). The firm claimed all its BTC reserves were used in a futile attempt to stabilize UST.
In a recent interview with the Financial Times, Terraform Labs co-founder Daniel Shin denied any allegations of malpractice or fraud. He said:
South Korean authorities have launched a full-scale investigation into the recent collapse of the Terra ecosystem and the role of Terraforms Labs employees and co-founder Do Kwon.
Related: Chinese state media signals tighter crypto regulations in Terra aftermath
The first investigation began in the second week of May after 81 investors collectively filed two complaints against the firm for deceiving investors with a flawed token.
As Cointelegraph reported earlier, South Korea’s feared investigative and prosecutorial team called “Grim Reapers of Yeouido” was reformed by the new president to look into Terraform Labs. Later, the South Korean Conservative Party requested a parliamentary hearing on the matter.
In the last week of May, Korean authorities subpoenaed all Terraform Labs employees to investigate any internal role in market manipulation. Authorities also requested crypto exchanges to freeze funds associated with LFG.
The national tax agency of South Korea fined Terraform Labs $78 million on tax evasion charges, which came to light in the aftermath of several investigations into the firm post-collapse.
The collapse of the $40 billion Terra ecosystem didn’t just invite legal troubles for the creators of the project, it has also forced regulators around the globe to rethink their crypto regulatory strategy. Korea formed a new crypto oversight committee, while Japan passed new regulations permitting only trust companies and banks to issue stablecoin.