Justice Department investigating collapse of TerraUSD, WSJ says

Quick Take

  • The Justice Department is investigating Terraform Labs and have questioned former team members, according to The Wall Street Journal. 
  • The Securities and Exchange Commission brought civil charges against Terra and its CEO Do Kwon last month. 

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.  


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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.

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About Author

Sarah is a reporter at The Block covering policy, regulation and legal happenings. Before, Sarah was a reporter with CQ Legal writing about securities regulation, which is where she first started reporting on crypto. Sarah has also written for The Bond Buyer and American Banker, among other finance-related publications. She graduated from the University of Missouri and earned a degree in print and digital journalism. Sarah is based in Washington D.C., and is an avid coffee lover. You can follow her on Twitter @ForTheWynn.


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