[Executive Summary]

• The Prosecution Service of Korea formed an investigation team and started an official investigation of the LUNA crisis. The team started by summoning early key employees of Terraform Labs. The investigation focuses on Do Kwon and other C-level officers’ violation of the Act on The Aggravated Punishment of Specific Economic Crimes (fraud) and the Act on the Regulation of Conducting Fund-raising Business without Permission.

According to a source in the legal community, the joint investigation team at the Seoul Southern District Prosecutor’s Office recently summoned a former developer of Terraform Labs as a witness. The former developer was allegedly involved in the initial development of the Terra blockchain.

Before the summon, those who suffered loss by investing in Terra-Luna formed an association and sued Do Kwon, the CEO of Terraform Labs, and Daniel Shin, the co-founder of Terraform Labs. The lawsuit was filed with the Seoul Southern District Prosecutors' Office. In addition, the L.K.B & Partners, a Korean law firm, filed another lawsuit against Terraform Labs, Kwon, and Shin, on behalf of five plaintiffs who suffered the same.

At the moment, Kwon is suspected of violating the Act on The Aggravated Punishment of Specific Economic Crimes (fraud) and the Act on the Regulation of Conducting Fund-raising Business without Permission. Based on the testimony of witnesses like the former developer, the joint investigation team will focus on (1) whether Kwon acted recklessly by continuing the development of an algorithm-based stable coin while knowing the weakness thereof, and (2) whether there has been any intentional market value manipulation.

As the prices of LUNA and related Vas can be expected to dramatically fluctuate as the investigation continues, it is recommended for any companies trading or handling LUNA to closely follow the updates on this matter.