SEOUL (BLOOMBERG) – South Korean prosecutors raided the home of Terraform Labs co-founder Daniel Shin, deepening a probe into allegations of illegal activity behind the collapse of stablecoin TerraUSD.

A series of raids on crypto exchanges and offices on Wednesday (July 20) also included Mr Shin’s home and his payment app company Chai Corp, the Seoul Southern District Prosecutors Office said via a text message, confirming an earlier report from MBC News.

Police also visited two affiliated firms, a spokesman for the prosecutors said, declining to provide further details in an ongoing investigation.

Policymakers around the world have zeroed in on stablecoins given the turmoil in the crypto markets, most notably the collapse of the popular TerraUSD token in May. That spurred a debate about whether blow-ups of crypto experiments could pose a risk to the wider financial system, along with calls for stronger regulation.

In South Korea, prosecutors conducted raids this week on 15 areas, including seven local exchanges such as Upbit, Bithumb and Gopax. The action takes place about a month after the authorities banned current and former employees of Terraform Labs from leaving the country. Prosecutors summoned a former official at a unit of Terraform Labs for questioning, KBS TV report has reported.

Prosecutors are also looking into whether the company’s other co-founder, Mr Do Kwon, evaded taxes by moving profits from cryptocurrency transactions to an offshore account, local news agency Yonhap reported.

Mr Shin and Mr Kwon, who is believed to be in Singapore, did not immediately respond to requests for comment. Since TerraUSD imploded, Mr Shin has put up a notice on his app distancing himself from Mr Kwon and TerraLabs.

TerraUSD crashed from its dollar peg in early May when the complex algorithm-based system involving the sister Luna token, which was meant to safeguard the peg, failed to work as planned. 

That coin, also known as UST, was supposed to maintain a one-to-one peg to the dollar through an algorithm and trading in Luna. The model was different from other stablecoins that purport to be backed by cash and similar assets. But the implosion rendered Luna almost worthless, setting off a rout in cryptocurrency markets.

Some Luna investors filed a complaint with South Korean prosecutors in May, alleging that Mr Kwon and his company had committed fraud and engaged in illicit fund raising.