South Korea's KBS Accuses TerraForm Labs of Wash Trading

South Korea's KBS Accuses TerraForm Labs of Insider Trading — *Terraform Labs founder Do Kwon*

Terraform Labs artificially inflated the volume of transactions on its Anchor Protocol in the days leading up to the collapse of its products, a South Korean media outlet claimed on Friday.

“The #1 account for collateral and loan usage was … Terra and Terra investment companies,” broadcaster KBS said in the Friday report. It added that ” customers who used Terra’s deposits, loans, and collateral the most were none other than Terra and Terra’s investors,” and claimed South Korean prosecutors had honed in on the allegation.

Using different accounts to manipulate trading volume is a practice known as wash trading. Hansung University’s Jaewoo Cho opined on the matter in a comment to KBS, telling the publication, “It can create an optical illusion [that] a platform is very active, healthy, and works well in the eyes of the general public. But, as it turns out, behind the scenes, [the wash trader] actually made [the trade] himself.”

The South Korea-based Terraform’s $41 billion ecosystem — including stablecoin Terra USD (UST) and cryptocurrency LUNA — imploded in May after UST lost its $1 peg. Numerous investors committed suicide as a result of the collapse, including a South Korean couple who killed their 10-year-old daughter in the process.

South Korean prosecutors have been investigating Terraform along with its 31-year-old CEO and founder Do Kwon with a vengeance. Officials issued a travel ban last month seeking to prevent Kwon and other Terraform employees from leaving the country before the investigation ends. And on Wednesday, they concluded a week-long raid on 15 companies tied to Terraform or its products — in addition to raiding co-founder Daniel Shin‘s home, as well as offices related to his payment app, Chai Corp.

Other companies on the list included crypto-exchanges Bithumb, Coinone, Gopax, Korbit, and Upbit.

Despite the travel ban, Kwon’s location is presently unknown, though rumors have suggested the Stanford grad is staying at a residence in Singapore. South Korea’s Ministry of Justice has imposed a “notification upon arrival” on Kwon’s passport, while local media reports indicate prosecutors are seeking to impose a travel ban on Shin.