Terraform Labs Under Probe by US DOJ Over Collapse of TerraUSD

The US Department of Justice (DOJ) has opened an investigation into Terraform Labs following the demise of its stablecoin, TerraUSD (UST). According to a story published by the Wall Street Journal, which cited people familiar with the matter, the investigation has also questioned former employees of the organization. 

In the event that the Justice Department files charge, those would be criminal offenses and might result in a prison sentence. This is because the Southern District of New York (SDNY), a division of the DOJ often assumes the lead in high-profile financial matters.

Markedly, representatives from the Justice Department and Terraform Labs, according to the report, declined to comment on the information.

Notably, the probe by the DOJ is covering a similar suit filed by the US Securities and Exchange Commission (SEC) last month. The regulator claimed accused Terraform Labs of selling crypto assets as unregistered securities. Additionally, Do Kwon, the former CEO of Terraform Labs was also accused of duping investors through his firm.

Furthermore, the DOJ and SEC are both investigating the gray areas surrounding the Chai payment platform used on the Terra Blockchain.

Can TerraUSD Be Revived?

Do Kwon’s stablecoin, TerraUSD (UST) lost its peg to the US dollar last year. The stablecoin’s demise is one of the year’s most devastating crypto disasters. According to multiple reports, caused significant losses and even resulted in the suicide of some investors.

The likelihood of a collapsed UST being revived relies on the particular circumstances that caused it to collapse. It, therefore, appears difficult to revive the stablecoin since the collapse was due to issues with its peg. This is because investors may have lost confidence in the stablecoin, and it may be challenging to regain their trust.

Notably, a recent Bloomberg report revealed that prosecutors are looking into some well-known trading firms, including Jump Trading Group and Jane Street Group, in connection with a potential TerraUSD rescue.

Meanwhile, a report highlights that the wallet linked to the UST’s depreciation may be owned by Jane Street, a global proprietary trading firm.