The collapse of the Terra Blockchain protocol as well as its associated LUNA and UST coins have attracted a series of investigations from several South Korean regulators. The latest of these efforts is from the Seoul Southern District Prosecutor’s Office’s joint financial and securities crime investigation team with reports that the staff of Terraform Labs has been summoned for questioning.
The regulators seek to know whether CEO Do Kwon and other members of the founding team knew about the flaws in the Terra model before the launch. The report from JTBC detailed that one of the early developers of the project who joined in 2019 has already shared statements to testify against Do Kwon.
The employee noted that there have often been raised alarms in-house with respect to how unsustainable it is for LUNA and UST to last long but Kwon neglected all warning signs to push the promotion of the project.
“If you pay interest of several tens of percent to investors without a stable collateral or profit model, people may flock to you at the beginning,” but “at a certain point in time, it has no choice but to collapse because it cannot handle interest payments and fluctuations in value,” the JTBC sources detailed.
Progress With Reviving Terraform Labs Tokens
While investigations targeted at Terraform Labs seem to be multifaceted, the startup is making a series of efforts to pick up the pieces and revive the protocol. Thus far, the Terra community passed a proposal last week that resulted in the forking of the Terra protocol to create an entirely new network, but without the UST stablecoin component.
The old token was tagged Luna Classic (LUNC) while the new token retains the LUNA identity and the latter was airdropped to every holder of the former based on a series of snapshots captured as defined pre-post attacks of the old protocol.
While the effort was not without a certain level of controversy among the community, Kwon is bent on reviving the decentralized finance protocols on the blockchain as well as helping investors regain back their lost funds over time. Whether the plan to fork Terra will be beneficial in the long term is yet unknown to all.