A South Korean court issued a warrant of arrest against Terraform Labs co-founder Do Kwon, sources reported on September 14, 2022.
According to a text message from the country’s Financial Crimes Unit of the Supreme Prosecutor’s Office (per Bloomberg), the warrant also included five other persons based in Singapore. Along with Kwon, the group is charged with violating the Capital Markets Act.
The warrant was issued four months after the Terra ecosystem and its stablecoin TerraUSD (UST) and cryptocurrency $LUNA collapsed in spectacular fashion. The crash wiped out over $40 billion of market capitalization in just a week.
The Rise and Fall of Terra
Terra is a blockchain protocol and payment platform for algorithmic stablecoins. The ecosystem was developed by Terraform Labs. Cryptocurrency developer Do Kwon (Kwon Do-hyung) and entrepreneur Daniel Shin (Shin Hyun-sung) founded the company
The network employs a dual token system using the UST stablecoin and the token $LUNA. Terra encouraged users to park their savings in the stablecoins. UST is pegged to the dollar, theoretically making it less volatile than most cryptocurrencies (hence the name “stable” coins).
Terra offered a 19.5% annual yield rate to its users. The figure enticed more unsuspecting customers to put in their hard-earned money. In early May, UST suddenly “depegged” after $2 billion was removed from the Terra network. Subsequently, UST and $LUNA collapsed, sparking a crash that affected the entire crypto market.
Following Terra’s fall, Korea-based investors with total damages of 1.4 billion won filed criminal complaints against Kwon and Shin. The Terraform Labs founders are currently facing charges of fraud, as well as other financial regulation violations.
According to the country’s financial authorities, about 280,000 users owned a total amount of 70 billion $LUNA in South Korea.
In late July, South Korean prosecutors raided Shin’s home in Seoul. The raid was part of the investigation over fraud accusations concerning the collapse of TerraUSD. In the same week, authorities also raided seven local exchanges including Bithumb, Coinone, and Upbit, along with eight addresses.
Terraform Labs decided to halt Terra blockchain’s operation on May 13 after failing to stabilize price movement. On May 25, the team approved a proposal to issue a new crypto, while decoupling from the stablecoin.
Terra 2.0 is the new Luna token’s name and “Luna Classic” ($LUNC) is the original coin. Meanwhile, the original platform is now “Terra Classic.”
$LUNA fell by as much as 36% and $LUNC by 25% in the past 24 hours as a result of news of Do Kwon’s arrest warrant.
As of this writing, $LUNA is trading at $2.88 with a $367,519,621 market cap, and a 24-hour volume of $1,724,174,759 (per CoinMarketCap). $LUNC is trading at $0.0002994, with a $1,841,685,440 market cap, and a 24-hour volume of $1,679,700,009 (per CoinMarketCap).