Do Kwon, the founder of stablecoin TerraUSD (UST) and token Luna, is facing a lawsuit in South Korea after the value of the two coins plummeted and cost investors billions of dollars in a short period of time.
The Seoul Southern District Prosecutors' Office said it had launched an investigation into Terraform Labs, the organization behind the Terra stablecoin project led by Do Kwon.
The announcement comes a day after five Korean crypto investors filed a lawsuit against Kwon and Terraform Labs co-founder Daniel Shin for alleged fraud and other breaches of financial regulations. The five investors suffered a total loss of 1.4 billion Won .
South Korean financial authorities estimate that there are about 280,000 users who own about 70 billion Lunas in Korea.
"Luna and Terra's design and issuance was to attract investors, but failure to properly inform them of the shortcomings, and the unlimited expansion of Luna's issuance amounted to defrauding investors," said a representative from LKB & Partners, the law firm representing the five investors, such as quoted from TechCrunch, Saturday (21/5/2022).
Do Kwon is also reportedly facing a fine of USD 100 billion for evading the payment of income and corporate taxes.
Prior to the decline, UST was predicted to be one of the most promising stablecoins. Unlike other stablecoins whose value is pegged to fiat money or other tangible assets, the value of UST is maintained by 'burning' Luna which is its sister token.
Luna's own value plunged 99% in a short period of time and UST's market capitalization plunged from USD 19 billion to less than USD 1 billion. On May 13 yesterday its value was only USD 0.000102 . Even though at its peak in the month of April, Luna's value had touched USD 119 per coin.
