South Korea revives 'Grim Reaper' financial crimes unit to investigate Terra's collapse

Quick Take

  • The collapse of Terra’s stablecoin UST is being investigated in South Korea. 
  • Founder Do Kwon also faces fines for alleged tax evasion, according to local media reports.

A specialized financial crimes unit has been tasked with investigating last week’s collapse of the Terra blockchain’s main cryptocurrencies while founder Do Kwon faces hefty tax fines, according to South Korean media reports.

The group, consisting of prosecutors and employees from the Financial Services Commission and the Financial Supervisory Service, will investigate the methods Terraform Labs used to attract investors, SBS News reported on Wednesday. 

The unit’s accuracy and clinical approach has earned it the nickname "Yeouido Grim Reaper," after the Yeouido financial district of Seoul. It is coming back into operation to investigate Terra after being disbanded two years ago, according to SBS News.

The Terra ecosystem fell into chaos last week after its stablecoin offering, TerraUSD (UST), de-pegged — causing the price of Terra’s native token Luna to plummet in value as supply soared to protect the peg. Kwon is now proposing forking Terra to revive the network. 

A separate report in Edaily said Kwon is facing a tax bill of 100 billion won ($78 million) for evading corporate and income tax payments. 

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The investigation related to the formation of the Luna Foundation Guard (LFG) in Singapore, a relocation of the company's headquarters which appeared to be for tax purposes, according to Edaily. It found that despite the legal entity relocating to Singapore, LFGs management continues to be carried out by domestic companies and residents in South Korea. 

Korean tax authorities are also preparing a separate 100 billion won fine to LFG, according to the report.

Kwon and LFG didn’t immediately respond to requests from The Block to comment on the reports.

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