27 May 2022 · 3 min read

Police Reportedly Looking into Allegations that a Terraform Staffer ‘Embezzled’ Funds

Source: AdobeStock / bong

 

South Korean police could reportedly take over from the “Yeouido Grim Reaper” financial crimes investigation unit in the probe of Terraform Labs after “embezzlement” charges were leveled at an unnamed employee.

The firm, which was launched in Singapore, shuttered its South Korean operations shortly before the recent terra (LUNA) “incident” – as it has been termed in South Korea. But, as previously reported, the “Grim Reaper” unit (officially the Financial and Securities Crime Coalition Team) – a team that reports to the Ministry of Justice and the prosecution service – has been assigned to investigate possible wrongdoings or financial irregularities in the lead-up to the crash.

The Fact reported that the Grim Reaper may be asked to step aside, however – as a police investigation may be required.

The media outlet quoted unnamed “legal community” sources as noting that while the Seoul Southern District Prosecutors’ Office has already launched an investigation into Do Kwon, Terraform’s co-founder, the Cyber Investigation Division of the Seoul Metropolitan Police Agency “received information in the middle of this month that a person believed to be an employee of Terraform Labs had been suspected of embezzling corporate funds.”

Police are reportedly “investigating” the case, with suggestions they may have asked “exchanges” and other financial institutions to temporarily freeze assets while officers continue their investigation.

Some of these allegations may have resulted from one of the many civil legal cases that have been brought forward by investors in South Korea, with a number of lawyers representing hundreds of investors hoping to bring their cases to court.

However, as some of these cases appear to involve accusations of criminal wrongdoing, the police may be required to move in.

The media outlet pointed out that the situation has been complicated by the fact that some of the individual cases brought against Terraform allege damage worth under USD 400,000. Under South Korean law, prosecutors cannot directly investigate financial crimes worth under this amount. For this reason, a number of investors have attempted to bring joint cases to prosecutors – mainly under the banner of major law firms.

Legal experts quoted by the same media outlet opined that charges could be hard to prove in this case – due largely to the fact that tokens are not viewed on the same footing as money in the legal sphere. They also claimed that it would likely be hard to prove that there was “intent” to defraud or cause financial damage on Terraform’s part – and that this could be key in any investigation or criminal/civil case.

Regulators are separately investigating a number of Terraform partner firms.

Cryptonews.com has reached out to Terraform Labs for comment. 

Meanwhile, there was mixed news for Terraform and the terra community from South Korea’s biggest exchanges. All five licensed exchanges that have fiat KRW trading permits have either delisted LUNA or are in the process of doing so. But, Newsis reported, all five (including the market-leading Upbit) said they would be offering support for the Terra network’s forthcoming airdrop.

The media outlet noted that in the case of Upbit, customers “who held LUNA as of 11:59pm (KST) on the May 7, before the price of Luna crashed, will receive an airdrop of ‘new’ LUNA coins” – which have been dubbed as LUNA2 by South Korean exchanges.

But, the companies were quick to point out, this would not mean that they would necessarily be listing the new coin. The firms instead decided to refrain from further comment on the matter.

Munhwa Ilbo reported that Coinone, the last of the five exchanges to have made a LUNA delisting announcement, has now confirmed that it will end LUNA support on June 1.

The exchange and others have been criticized by MPs and media experts for failing to act faster and in a more coordinated manner – instead allowing trading to continue. This, in turn, led to speculative trading and “kimchi premium” LUNA dumping on trading platforms earlier this month.

But Coinone justified its decision, stating that it has a strict set of internal protocols it abides by in all token listing/delisting-related matters.

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Learn more: 
- Terra Moves Closer to New Chain Launch, Secures Exchange Support
- LUNA, UST Jump as Terra Revival Plan Moves Ahead After Vote

- Upbit Operator Faces Scrutiny Over Affiliate’s 2020 USD 103M LUNA Sale
- South Korean LUNA Buying Skyrockets, Token Trading at Huge Premium on Domestic Exchanges

- South Korean Regulators to Inspect Companies Linked to Terraform
- More Crypto Regulation Incoming in South Korea Following Terra Collapse, Gov’t Indicates