Justice Department investigating collapse of TerraUSD, WSJ says

The Justice Department is investigating the collapse of the TerraUSD stablecoin, The Wall Street Journal reported, citing sources.

Terraform Labs and its CEO Do Hyeong Kwon are already facing civil charges brought by the Securities and Exchange Commission last month. If charges are ultimately brought by the Justice Department, those would be criminal and could carry a  prison sentence.  

The Justice Department’s investigation covers similar areas as the SEC suit, the Journal reported, citing people familiar with the matter. The Federal Bureau of Investigation and the Southern District of New York questioned former Terraform Lab team members in recent weeks, according the Journal.  

The Journal also reported that investigators were asking about the relationship between Chai, a Korean payments company, and the blockchain that Terraform created to power TerraUSD. To build excitement in the power of the Terraform blockchain, Kwon and his team claimed that Chai was using it to settle millions of transactions, which was a complete fabrication, the SEC alleged in February.  

U.S. prosecutors are also looking into chat-group conversations among trading firms including Jump Trading Group, Alameda Research and Jane Street Group about a potential bailout of TerraUSD that never ended up happening, Bloomberg News reported separately on Monday.