South Korean police investigates Terra
South Korean police investigates Terra

South Korean police investigates Terra

By Marco Cavicchioli - 31 May 2022

Chevron down

The South Korean police have launched a large-scale investigation into the Terra crash, looking for culprits for what happened.  

Terra crash comes under the magnifying glass of South Korean police

A potential negative outcome of the ongoing investigation could spell the end of Terra 2.0

This was reported by local TV network Jtbc, according to which the investigation also involves the entire staff and employees of Terraform Labs, the company founded by Do Kwon that designed and built the Terra protocol. 

According to Jtbc, one of the employees interviewed said that there was already speculation within the team that there could be a collapse at any time, but Do Kwon preferred to keep going, risking rather than stopping everything

The hypothesis being investigated is that the risk was inherent within the protocol itself, and therefore the collapse was due to some sort of design error. This would imply personal responsibility for those who designed, built and managed it. 

The key point, which has actually been known for a long time, is that paying annual interest of several tens of percentage points without a stable guarantee, or a business model that generates profits, could cause a collapse at any time, due to the impossibility of managing fluctuations in value in a sustainable manner. 

Investigators are also investigating possible intentional price manipulation and whether the review process of the cryptocurrency was adequate. 

In South Korea, 76 people are reported to have sued Do Kwon and co-founder Shin Hyun-Seong, amounting to a total of 6.7 billion won lost in the collapse

In light of this, it is hard to imagine that the company’s top management was unaware of the risks, and it is also hard to imagine at this point that they could bear absolutely no responsibility for what has happened in recent weeks. 

It remains to be seen, however, what these hypothetical responsibilities might actually be, and especially whether the South Korean justice system will decide to take any action against Do Kwon and Terraform Labs. 

What could be the repercussions of possible wrongdoing?

In the hypothetical case that particularly harsh measures are taken, repercussions can also be expected on the progress of the newly launched Terra 2.0 project. 

Moreover, there is already speculation that South Korea itself, the home of Do Kwon and Terraform Labs, may intensify its regulation of cryptocurrencies, precisely to try to protect its citizens from other crashes similar to this one. In the country, cryptocurrencies have always attracted a lot of attention from citizens, who are therefore particularly exposed to this kind of risk. 

Already in the past, South Korea has led the way in adopting new regulations, e.g. for crypto exchanges. Therefore, it is easy to imagine that should they legislate again, they could once again open the floodgates to a wave of new laws around the world

It is indeed difficult to imagine that Terra’s colossal implosion will not leave deep and permanent repercussions on the crypto markets, especially with regard to the approach of the public entities that are in charge of supervising the financial markets and trying to protect investors as much as possible. 

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded and the Facebook group" Bitcoin Italia (open and without scam) ".

We use cookies to make sure you can have the best experience on our site. If you continue to use this site we will assume that you are happy with it.