South Korea prosecutors raid crypto exchanges, homes in Terra probe

SEOUL (BLOOMBERG) –  South Korean prosecutors are stepping up their investigation into Terraform Labs, whose TerraUSD stablecoin collapsed in May, setting off a rout in cryptocurrency markets.

A team of investigators from the Seoul Southern District Prosecutors Office began seizing transaction records and other material from seven local exchanges on Wednesday evening (July 20), the office said in a message.

Prosecutors also conducted raids on eight other places, including the homes and offices of people who are under investigation. The office declined to provide more information on those raids, citing investigation security. 

TerraUSD crashed from its dollar peg in early May when the complex algorithm-based system involving the sister Luna token, which was meant to safeguard the peg, failed to work as planned. The implosion rendered Luna almost worthless. 

Some Luna investors filed a complaint with South Korean prosecutors in May, alleging Terraform Labs founder Do Kwon and his company had committed fraud and engaged in illicit fund raising. 

Yonhap News Agency reported earlier that payment app Chai Corp was among the companies being searched, along with local crypto exchanges such as Upbit, Bithumb, Coinone, as well as unidentified venture capital funds that invested in the Terra blockchain project. 

Spokesmen for Upbit, Bithumb and Gopax confirmed that raids took place on Wednesday evening at their offices, and that prosecutors seized transaction records. Chai and Coinone did not immediately respond to requests for comment.

In June, the South Korean authorities banned current and former employees of Terraform Labs, which lists Singapore as its base, from leaving the country.

KBS TV reported that prosecutors had summoned a former official at a unit of Terraform Labs, while Yonhap said prosecutors were probing whether Mr Kwon evaded taxes by moving profits from cryptocurrency transactions to an offshore account.