Seoul police probe allegation of embezzlement by Terraform staff

SEOUL police are investigating allegations that staff of Terraform Labs, the company behind the collapsed TerraUSD algorithmic stablecoin, embezzled Bitcoin holdings amassed to help defend the token’s peg to the dollar. 

The Seoul Metropolitan Police Agency is investigating a report about a “suspicious” crypto wallet that may have been used to embezzle Bitcoin, an official said by phone on Thursday (Jun 9). It wasn’t clear whether the wallet belonged to one or several employees, and the amount of Bitcoin possibly stolen isn’t yet known, the official said.

TerraUSD crashed from its dollar peg in early May, rocking cryptocurrency markets and spawning efforts by governments around the world to more tightly regulate stablecoins. The token’s collapse, and the accompanying plunge in its sister coin Luna, wiped out some US$40 billion of market value. Do Kwon, the entrepreneur behind Terraform Labs, is a South Korean native.

Terraform Labs didn’t immediately respond to en email seeking comment. 

The allegedly embezzled Bitcoin appears to have belonged to Luna Foundation Guard, the entity set up by Terraform Labs to maintain TerraUSD’s peg to the dollar, Yonhap News TV reported on Thursday, without citing anyone. 

LFG had amassed crypto reserves that at one point reached US$3.5 billion to use as a backstop for defending the link. It held 80,394 Bitcoin as of May 7 - worth about US$2.9 billion at the time - according to a tweet from the entity. As of May 16, that hoard had dwindled to 313 Bitcoin.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Separately, South Korean prosecutors are investigating allegations that TerraUSD and Luna tokens were used in a Ponzi scheme, Yonhap News reported in late May. BLOOMBERG