Investigation into Terra’s activities is still not over as fresh allegations emerge.

Since the collapse of Terra tokens UST and LUNA, the firm behind the crypto project TerraForm Labs (TFL), has been under widespread scrutiny from its community, with many alleging that the company is the major reason that caused the plunge of the cryptocurrencies.

While TFL is still trying to make investors whole following their losses last month, a fresh allegation has been leveled at the company by unknown investors.

Terra Faces Embezzlement Allegations

According to a Bloomberg report today, South Korean police have launched a new investigation into a recent allegation that employees of TFL embezzled the company’s Bitcoin (BTC) reserve.

Bloomberg noted that an official from the Seoul Metropolitan Police Agency said by phone that Korean law enforcement agents are investigating the wallet alleged to have been used to embezzle investors’ funds.

While the official did not disclose the owner of the cryptocurrency wallet, Korean media outlet Yonhap reported that the wallet belongs to Terra’s Luna Guard Foundation (LFG), the organization established to maintain UST’s peg against the dollar.

According to Bloomberg:

“The Seoul Metropolitan Police Agency is investigating a report about a “suspicious” crypto wallet that may have been used to embezzle Bitcoin, an official said by phone on Thursday. It wasn’t clear whether the wallet belonged to one or several employees, and the amount of Bitcoin possibly stolen isn’t yet known, the official said.”

It is noteworthy that during the course of sustaining UST dollar peg, LFG had amassed a total of $3.5 billion worth of Bitcoin.

However, at the time when UST lost its peg due to the massive interest rate of 20% paid out to investors of its Anchor program, Terra noted that it used its Bitcoin reserve to save UST from crashing further but failed, a move that was criticized by Binance Changpeng “CZ” Zhao.

Terra’s Lack of Transparency With the Community

Meanwhile, Terra has been largely criticized for its lack of transparency. Many investors believe the firm is not being entirely honest with them.

It is no longer new that Terra crashed due to the massive ROI paid to investors in its Anchor program. According to one of Terra’s core designers, Do Kwon, the CEO of Terra, despite being told that the Terra project will crash if the Anchor interest rate is set at more than 3.6%, still proceeded to launch the project at a whopping 20% ROI in a bid to lure more investors.

Similarly, fresh reports also emerged about how the TFL lied about not owning any of the new LUNA 2.0 tokens. However, investigations reveal that the company hid 42 million LUNA 2.0 tokens in multiple hidden wallets.

A US Court has ordered Terra’s Do Kwon and Terraform Labs to comply with subpoenas issued by SEC.

Terra’s founder, Do Kwon, and his company, Terraform Labs, are still in legal muddy waters. Besides being investigated in South Korea, Do Kwon and TFL are now faced with another legal battlefront in the United States.

According to a recent ruling by the US Second Circuit, which is the US Federal Court of Appeal, the two entities associated with Terra are to comply with SEC subpoenas issued earlier.

SEC Was Within The Law To Serve Subpoena

The SEC issued the subpoena to Do Kwon while he was in the US attending a crypto conference in New York City back in September 2021. However, Do Kwon didn’t show up to iron out things with the SEC. The SEC wanted Do Kwon and TFL to appear before it and prove that Terra’s crypto tokens are not securities registered illegally.

A lower court issued the same order, but Kwon and TFL appealed the ruling. Now that the higher court has affirmed the decision, it will be up to Kwon and his company to decide on whether to appear before the SEC or keep running.

Back in South Korea, lawmakers have called for Kwon to appear before them and explain what led to the collapse of Terra LUNA and UST which saw over 200,000 South Koreans lose their money.

Kwon Says SEC Has No Jurisdiction

While the courts in the US say otherwise, Do Kwon says that the SEC doesn’t have any jurisdiction to investigate him and his company.

However, it’s notable that Terra’s tokens are traded all over the world, especially on exchanges – most of which have huge customer bases in the US. These include Binance.US and Coinbase.

Under US federal law, the SEC has the mandate to keep all businesses and trades happening within the US borders clean. Cryptocurrencies fit in this category. A case in point can be seen where SEC is currently involved in a legal tussle with Ripple over XRP’s status.

Ethereum creator has received 1 million OP from an anonymous hacker who seized 20 million coins from Wintermute.

Layer-2 scaling solutions are great because they’re fast, but they can be risky sometimes. Such is the case where 20 million Optimism tokens were sent from the Optimism Foundation to Wintermute, a market maker, and liquidity provider. The tokens were sent from a Layer-2 address to a Layer-1 address.

Apparently, Wintermute failed to synch the two addresses that were clearly on different layers. As such, the 20 million OP tokens were left floating on the chain – not reaching the intended address, and not refunded to the source address.

Hacker Seized All Of The “Floating Coins”

Wintermute assured Optimism that the coins were safe and could be retrieved while the coins were floating. That didn’t turn out to be true because the coins were soon seized by an outsider – a hacker who found a way to redirect the coins to his/her address.

Vitalik Buterin Gets 1 Million OP

Interestingly, the hacker didn’t use the coins to manipulate the governance system on Optimism. Instead, he sent 1 million OP coins to Ethereum founder Vitalik Buterin. At the time, the 20 million coins were worth roughly $35 million. The transfer was reported in a tweet by PeckShieldAlert.

#PeckShieldAlert ~1m $OP transfered to @VitalikButerin from Wintermute/OP exploiters https://t.co/U1c2MyeObE pic.twitter.com/wdLOd0XveC

— PeckShieldAlert (@PeckShieldAlert) June 9, 2022

When Optimism and Wintermute went public with the news, OP price dipped by over 30%. At the time of this writing, OP is trading at $0.84 and registering a 24-hour drop of 15%. At the moment, with the current price, the coins are worth less than $20 million.

Hacker Offered A Job At Wintermute

Meanwhile, Wintermute has taken full responsibility for the loss and has made attempt to contact the hacker. The company has even hinted at a possible job offer to the hacker. However, the hacker has remained silent after sending the 1 million OP to Vitalik.

Interestingly, Wintermute hasn’t been all cozy to the hacker, though it has been somewhat kind to Optimism. While the company is looking to negotiate with the hacker to get them to refund the tokens, its approach seems a bit abrasive.

Its statement read,

“You have one week to consider being a whitehat. In case the above doesn’t happen, we are 100% committed to returning all the funds, tracking the person(s) responsible for the exploit, fully doxxing them, and delivering them to the corresponding juridical system. Remember that robbers need to get lucky every time. Cops only have to get lucky once. This is not a “code is law” theoretical argument.

This is you taking a bag with cash that was left behind by a (careless) person. Us being careless still leaves you a criminal. We already started investigating the potential leads, in certain cases stopping short of informing respective law enforcement agencies. Consider your options and choose to be good and optimistic instead of living in fear.”