The Seoul Southern District Prosecutor’s Office in Korea is investigating whether it can bring charges of a Ponzi scheme against Terraform Lab’s CEO, Do Kwon.

The prosecutor’s department in Korea is looking into charging Terraform Labs co-founder Do Kwon with running a Ponzi scheme using the Anchor Protocol, a type of crypto bank where depositors can earn up to 20% yields annually for staking Terra. “Kwon’s remarks promising returns could provide a key clue,” a prosecutor told the Korea Herald. Named after Italian fraudster Charles Ponzi, a Ponzi scheme rewards existing or early investors with funds paid by new investors. When funds from new investors run out, the Ponzi scheme collapses. As BeInCrypto recently reported, FTX CEO Sam Bankman-Fried recently described yield farming as a Ponzi scheme.

This past Thursday, five Korean investors clubbed together to file a class-action lawsuit with law firm LKB & Partners against Kwon and co-founder Shin Hyun-Seong. The lawsuit claims that Terraform Labs did not make investors aware of the weaknesses of the algorithmic stablecoin Terra (UST), resulting in losses of $1.1M for the investors. Six lawyers from the Capital Markets Law and Intellectual Property Teams at LKB also filed a provisional order to seize property belonging to Kwon. Some of LKB’s employees also lost money as UST fell from its dollar peg earlier this month, sending shockwaves through the industry.” TerraUSD derived its stability from an algorithmic relationship with Luna, its sister coin.

“There are related investors inside the law firm, and we plan to file a complaint against CEO Kwon at the Financial Investigation Unit of the Seoul Metropolitan Agency are also being considered,” said Kim Hyeon-Kwon, a partner at the law firm.

Terraform’s legal team quit following the UST crash, and outside counsel is now handling all the company’s legal matters.

The 30-year-old Stanford alumnus Kwon, who previously had stints as a software engineer at Microsoft and Apple, began offering investors the Luna cryptocurrency in 2018. Initial backers of the project included Pantera Capital, Galaxy Digital, and Lightspeed Venture Partners. Pantera Capital made 100 times more than its initial investment when it sold its Luna holdings last year, collecting approximately $170M from an initial investment of $1.7M. Paul Veradittakit, an investor at Pantera, said following a recent run that saw TerraUSD, the stablecoin offered by Terraform Labs since 2020, crash from its dollar peg, “A lot of retail investors have lost money. I’m sure a lot of institutional investors have too.” Kathleen Breitman, one of the founders of the Tezos blockchain, said that institutional investment in Terraform Labs offered “a false sense of security to people who might not otherwise know about  these things.”

What do you think about this subject? Write to us and tell us!

The post Korean Prosecutors Consider Bringing Ponzi Scheme Charges Against Terraform Labs’ CEO appeared first on BeInCrypto.

Similar to Notcoin - Blum - Airdrops In 2024

origin »

169 +