More businesses reveal losses as authorities halt raids in probe linked to Terra collapse

South Korean prosecutors arrested three people on August 11 for ties to an illegal cryptocurrency scheme. The arrests came five weeks after Justice Minister Han Dong-hoon had a meeting with US officials to explore collaborative efforts in combating financial crimes, especially when cryptocurrencies are used. involved.

The Korean Minister of Justice held talks with the head of the Securities and Commodities Fraud Task Force and the co-head of the Securities and Commodities Task Force in New York. Both parties identified their scope with the United States Securities and Exchange Commission which considered whether or not the UST was deceptively marketed to be more stable than it was. South Korean prosecutors agreed to investigate whether there was market manipulation, tax evasion and fraud.

Terra Survey Updates

Two weeks after the Justice Minister’s visit to the United States, South Korean authorities carried out a series of raids on more than a dozen locations in the country in connection with the Terra ecosystem crash. Local press briefing Yonhap News Agency reported on July 20 that investigators from the Seoul Southern District Prosecutors Office went after several local businesses that had ties to Terraform Labs and cryptocurrency exchanges. Bithumb, Coinone and Upbit are among those visited.

Officers commandeered records of Terra-related transactions to uncover the events that led to the collapse of TerraUSD and LUNA assets. They also reportedly raided the residence of co-founder Daniel Shin and companies he worked closely with in the past. The report also states that investigators stayed in some locations for a week.

Newsis, another media outlet, published an article on July 28 detailing that investigators conducted the raids thoroughly.

“It took a long time to extract [relevant information] confiscated [material] and verification [its] relevance of being evidence [of wrongdoing]”, said an anonymous source from the prosecutor’s office.

There have been allegations that some people within Terraform either knew a catastrophic fallout was a likely outcome or conspired to set it up. Either way, the crash destroyed both retail and institutional portfolios.

Terra’s early backers are among the biggest casualties

The ripple effects are still being felt by companies that had indirectly injected massive capital into Terraform Labs and Terra assets. Hedge fund manager Three Arrows Capital has been forced to file for bankruptcy after reports of insolvency. Lending and brokerage firms also bore the brunt, with Celsius and Voyager seeking bankruptcy protection.

In recent weeks, more companies that have backed Terra and its projects have released reports highlighting the extent of the losses recorded on their balance sheets.

Hashed CEO Reveals His Company Lost Over $3.5 Billion Due to Luna Collapse

In a recent interview with Bloomberg, Hashed Managing Director Simon Seojoon Kim revealed that his venture capital firm has been hit hard. There are discrepancies in the actual sum of tokens the Seoul-based blockchain company held at the time of the implosion, but all accounts are compatible with at least 30 million LUNA tokens. This would translate to $3.6 billion when the token price peaked at around $120 in April.

Kim said Bloomberg on August 2, he bought 30 million LUNA tokens as the first investor, and the company kept most of it until the end. String data captured by CoinDesk shows that the Korean venture capital fund had invested no less than $49.90 million in LUNA on the Columbus 3, 4 and 5 mainnets. the cryptocurrency industry.

“There is no wallet that guarantees success [in this sector]and we make our investments with that in mind, we believe in growing community and that has never changed,” he pointed out.

He also described his intention to create a third venture capital fund by mid-2023, adding that he would invest in GameFi projects. His reputation, however, is not as solid as his belief in GameFi investments. The Hashed boss has been accused of promoting the LUNA token and selling off some of his holdings before the collapse, raising questions about his integrity. Kim addressed these reports claiming that his company does not offer trade recommendations and that he held 99% of his LUNA investment throughout the crash, only selling his staking rewards.

Uprise lost 99% of funds held by users in short bets

Another hard-hit investor was Kakao-backed Korean startup Uprise, losing 99% of user funds on deposit. As reported by local media Seoul Economic Daily, the crypto startup has been caught in the throes of falling prices, “misled” by AI-powered automated trading strategies. Uprise employed a robo-advisor, a technology that entered short sell positions using client funds.

Although the LUNA outage established a safe path to zero, the token experienced temporary pumps. These brief surges, like the one that took LUNA from $0.68 to $7.88 in just four hours on May 11 (LUNA/BUSD pair), highlighted the volatile storm that engulfed the 20.4 million dollars (26.7 billion won) of customer funds.

Internally, Uprise lost up to $2.9 million (3.9 billion won) of its funds. A representative confirmed to the local publication that “damage to client assets occurred due to unexpectedly high volatility in the market. Nonetheless, the company said it would explore various options to compensate affected customers. The company is backed by giant venture capital firms in Korea, including KB Investments and Kakao Ventures. Its client base includes a large number of high net worth individuals and institutional entities.

There is, however, a gray area around Uprise, as it is not a licensed Virtual Asset Service Provider (VASP) in South Korea, a problematic situation as certification is required for businesses to custody of virtual assets. Uprise failed to comply with this requirement established by the law on specific financial information at the end of last year. The company argued that it does not collect won or invest directly in digital assets and only dabble in futures.

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