A probe into possible illegal activity behind the algorithmic stablecoin TerraUSD (UST) and the affiliated LUNA token has deepened with a raid on the Seoul home of the firm’s co-founder Daniel Shin, according to a Bloomberg report citing local media.

Investigators also reportedly visited the office of the mobile payment app Chai, which was founded by Shin in 2019.

Chai has been marketed as the first mobile payments app to utilize the Terra blockchain to enable anyone with a bank account to make cheaper transactions for local businesses in Korea.

Kwon and Shin launched Terraform Labs in 2018, initially with the goal of upending payment giants like PayPal. Later that year, the pair raised $32 million, and in 2019 an initial coin offering yielded $62 million.


Shin stepped down from his position as Terraform Labs CEO in March 2020 and reduced his stake in the company to focus on building Chai, with Do Kwon, the firm’s other co-founder, taking control of the business.

A spokesperson for the Seoul Southern District Prosecutors Office confirmed the reports of the raid on Shin's home, adding that offices of two other firms affiliated with the Chai app were raided as well, declining to provide further detail.

The raids are a part of an ongoing investigation into allegations that Kwon intentionally caused the collapse of TerraUSD.

Unlike other stablecoins backed by fiat currencies like the U.S. Dollar or the Euro, the value of UST was maintained by a complex algorithm that burned the Luna token to mint new UST.


LUNA and UST were the ninth and 10th largest cryptocurrencies by market capitalization, respectively, before their implosion in May, which took around $55 billion in investors’ money along with them.

Authorities raid Korean crypto exchanges

On Wednesday, a team of South Korean investigators visited the offices of seven local crypto exchanges, including Upbit, Bithumb and Coinone, seizing transaction records and other materials. The authorities planned to analyze the materials seized during the raids and question witnesses in order to determine the size of damages suffered by investors.

Prosecutors are also said to be looking into whether Kwon, who is believed to be residing in Singapore, dodged taxes by moving profits from cryptocurrency transactions to an offshore account.

Last month, South Korean authorities imposed a travel ban on key team members of Terraform Labs, with at least 15 former and current employees barred from leaving the country to avoid further investigation.

Prior to that, the Seoul Southern District Prosecutors’ Office’s joint financial and securities crime investigation team has summoned former employees of Terraform Labs who were involved in the initial development of the Terra ecosystem in 2019.

One of those employees has reportedly revealed at the time that the team had doubts about the TerraUSD (UST) stablecoin design from the very start, however, Kwon ignored their warnings that the project may fail.

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