The crypto world is abuzz with the news of charges filed by the United States Securities and Exchange Commission (SEC) against Terra and its founder, Do Kwon.
What’s surprising is not just the charges themselves but the fact that they come after months of SEC crackdown on crypto-related businesses.
It’s been almost a year since Kwon and his company allegedly caused millions of investors to lose their money and triggered a severe bear market that led to the collapse of other crypto companies.
Who is Kwon, and what led to Terra’s downfall? Let’s explore the story behind this latest crypto bombshell.
How did it all start?
Do Kwon’s journey from a computer science graduate to the founder of Terraform Labs, a blockchain technology company, is a story of ambition and innovation.
Kwon’s fascination with cryptocurrency began when he was working with distributed networks at Anyfi. However, he soon realized that the popular crypto technologies lacked accessibility and practical value.
In 2017, Kwon co-wrote a whitepaper proposing a decentralized payment system featuring a stabilized digital currency as a medium of exchange. He argued that an ‘elastic money supply’ could remove cryptocurrency volatility while still being decentralized.
The whitepaper caught the attention of Daniel Shin, a successful entrepreneur in the South Korean tech space, who shared Kwon’s vision. Together, Kwon and Shin founded Terraform Labs in 2018 to create a decentralized price-stable cryptocurrency.
They developed the Terra proof-of-stake (PoS) blockchain using Cosmos SDK, supported by two major tokens – LUNA, the native token, and UST, the algorithmic stablecoin.
In just a few years, LUNA became one of the most successful digital currencies by market capitalization, thanks to the popularity of its algorithmic stablecoin UST.
However, in May 2022, the TerraUSD and LUNA collapsed, leading to legal and criminal charges against Kwon by various governments and individual investors.
What’s happening now?
Kwon and his company, Terraform Labs, have been scrutinized by various regulatory bodies, investors, and traders over the riskiness of a coin not backed by a reserve asset. The suspicion of fraud and running a Ponzi scheme has also been raised.
In November 2022, South Korean investors affected by the crash demanded a class action lawsuit against Terraform Labs. The South Korean government has also pursued criminal charges against Kwon for violating capital markets law.
Lawsuits have been filed in the U.S. and Singapore, and Kwon has been accused of fraud by his investors.
The allegations against Kwon and Terraform Labs have sent shockwaves through the cryptocurrency world, leaving many questioning the future of the industry and the need for stricter regulation.
What are the allegations against him?
The SEC has filed a lawsuit against Terraform Labs and Do Kwon for allegedly deceiving investors in a complex scheme involving unregistered securities.
According to the SEC, the duo misled investors by claiming that the Korean payments application, Chai, used their blockchain platform, Terra, to process payments.
However, the payments were mirrored on the blockchain and processed using conventional means.
The SEC also points to Kwon and Terraform Labs’ efforts to create and advertise the unsustainable lending protocol, Anchor, and offering five securities, including Luna and Wrapped Luna.
The regulators allege that Terraform Labs also sold billions of dollars worth of Luna and MIR tokens into the secondary market, including platforms where U.S. persons were allowed to trade.
Where is he now?
Kwon has been on the run since last year when South Korean authorities issued a warrant for arrest for violating capital-markets law. Since then, he has remained elusive, his whereabouts unknown to all but a few insiders.
But now, rumors are swirling that Kwon may have found a new home in Serbia, where he has reportedly been laying low since December.
While Kwon’s exact location is still unknown, he made a surprise appearance on Twitter recently, denying any wrongdoing and insisting that he has “never stolen any money or had secret cashouts.”
However, South Korean officials remain unconvinced, having stripped Kwon of his passport and issued an Interpol red notice for his arrest.
Meanwhile, officials in Serbia remain tight-lipped about Kwon’s presence in the country, and speculation continues to swirl about his ultimate fate. For now, however, Kwon remains at large, a symbol of the continued unpredictability and intrigue of the cryptocurrency world.
The road ahead
Before this scandal broke, Kwon was a rising crypto star known for his sharp wit and charm. However, he also had a reputation for arrogance and a tendency to belittle those he considered irrelevant.
As officials from Korea search for him in Serbia, the crypto community is on edge. Many questions the SEC’s actions and wonder what this means for the industry’s future.
As the investigation continues, the world waits for the next chapter in this unfolding drama. Will Kwon be found and brought to justice, or will he continue to elude the authorities? Only time will tell.