Do Kwon

South Korea issues arrest warrant for Terra Founder Do Kwon

A court located in Seoul, South Korea issued a warrant for the arrest of Kwon and five other people who are currently in Singapore.

While the LUNC community rejoices because of a potential comeback for the Terra Luna Classic (LUNC) token, the founder of the Terraform Labs, Do Kwon, is now facing a warrant of arrest from South Korean authorities. 

A court located in Seoul reportedly issued a warrant of arrest for Kwon and five other people who are all currently located in Singapore. According to the prosecutor’s office in South Korea, the Terra founder is facing allegations of violating the country’s capital markets law

In May, what the Terra community first suspected to be a FUD attack became one of the most devastating market crashes in crypto history, triggering the loss of millions of assets from investors of TerraUSD (UST) — now renamed TerraUSD Classic (USTC) — and Terra (LUNA), which is also rebranded to Luna Classic (LUNC). The UST stablecoin started to drift away from its United States dollar peg, dropping to an all-time low of $0.006 in June.

Apart from UST, LUNA, an asset that once reached its peak at $119.18 in April, dropped massively to an all-time low of $0.0000009, causing suicide hotlines to be pinned on the project’s Reddit community.

The Terra crash also affected various decentralized finance (DeFi) protocols, leading to an 80% and above decline for projects that were associated with the stablecoin.

Related: Exchanges criticized for ‘nothingburger PR’ posts on upcoming LUNC tax burn

On Aug. 17, Kwon hired attorneys from a law firm based in South Korea just a few days after saying that the authorities have not yet reached out to him. According to a report, the Terra founder delivered a letter of appointment to the department responsible for investigating the Terra collapse.

The Terra founder also broke his silence on Aug. 16 in an attempt to clear his name from various allegations. However, despite Kwon’s efforts, community members still criticized the Terra CEO, comparing his situation to the creator of Tornado Cash, who was arrested for writing a privacy code.

‘Far too easy’ — Crypto researcher’s fake Ponzi raises $100K in hours

Crypto Twitter user FatManTerra explained the fake investment scheme was used to teach people a lesson about investing blindly in crypto schemes shilled by influencers.

Crypto influencer FatManTerra claims to have gathered over $100,000 worth of Bitcoin (BTC) from crypto investors in an investment scheme that was later revealed as fake. 

The crypto researcher said he created the fake investment scheme as an experiment and to teach people a lesson about blindly following the investment advice of influencers.

The account on Twitter has around 101,100 followers and is mostly known for being a former Terra proponent that now actively speaks out against the project and founder Do Kwon following its $40 billion collapse in May.

In a Monday tweet, FatManTerra told his followers he had “received access to a high-yield BTC farm” by an unnamed fund, and said that people could message him if they wanted in on the yield farming opportunity.

“I’ve maxed out what I could, so there’s some leftover allocation and I thought I’d pass it along — priority will be given to UST victims. DM for more details if interested,” he wrote.

While the post received a ton of negative responses from people calling it out as a scam, FatMan said he still managed to raise more than $100,000 worth of BTC from the initial post on Twitter and on Discord within a span of two hours.

In a Tuesday tweet, FatManTerra revealed the investment scheme was fake all along, describing it as an “awareness campaign” to show how easy it is to dupe people in crypto by using simple buzzwords and promising big investment returns:

“While I used plenty of buzzwords and put on a very convincing act on all platforms, I made sure to keep the investment details intentionally obscure — I didn’t name the fund & I didn’t describe the trade — no one knew where the yield was coming from. But people still invested.”

“I want to send a clear, strong message to everyone in the crypto world — anyone offering to hand you free money is lying. It simply doesn’t exist. Your favorite influencer selling you quick money trading coaching or offering a golden investment opportunity is scamming you,” he added.

FatManTerra claims to have now refunded all of the money and reiterated that “free lunches don’t exist.”

The notion of influencers allegedly promoting scams has been in the news of late, with YouTuber Ben Armstrong (BitBoy Crypto) taking legal action against content creator Atozy last month for accusing him of promoting dubious tokens to his audiences. However, he has since withdrawn the lawsuit.

Related: Do Kwon breaking silence triggers responses from the community

FatManTerra also stated that his fake fund post was inspired by the Lady of Crypto Twitter account, which has been accused of shilling questionable investment schemes to its 257,500 followers.

Korean exchanges agree on emergency system in case of Terra-style collapse

Korean exchanges will soon be required to list tokens based on the same guidelines to ensure compliance with local regulations, and make emergency decisions together to prevent another Terra fiasco.

Korea’s leading exchanges have agreed to form a new emergency system that will spring into action within 24 hours should another Terra-style collapse threaten to come to pass.

Under the new system, exchanges will convene to respond to sudden adverse market effects such as what happened with Terra in May.

The agreement came after five of the country’s largest crypto exchanges, Upbit, Bithumb, Coinone, Korbit and Gopax attended a session at the National Assembly, South Korea’s legislature to address market fairness on Monday, according to a report from local news outlet Daily Sports. 

Exchange leaders, members of National Assembly, and Financial Supervisory Services (FSS) chairman Lee Bok-hyeon discussed aspects of a new code of conduct exchanges will voluntarily adhere to in order to protect investors.

The new code will also see the rollout of a warning system in September to signal investors of unusually high-risk virtual assets due to abnormal changes in price or other unusual activity. 

In October, listing guidelines will be reviewed and a regular evaluation system will be put in place for all listed tokens.

In May, the collapse of the Terra ecosystem led to tens of billions of dollars in losses and a slew of legal troubles for the founder, Do Kwon, who was confirmed to have evaded about $40 million in taxes through Terraform Labs.

The code aims to systemize token listings and delistings to maximize regulatory compliance and eliminate differences in listing guidelines between each exchange.

Korean market lead of Ledger Jun Hyuk Ahn told Cointelegraph on Thursday that this new direction would bolster investor confidence in crypto exchanges that have been on shaky ground for years. He said “It’s too early to predict exactly what will happen, but it should bring more harmony to the market:”

“More transparency on listing and delisting processes will help bring back the trust from crypto traders that were lost through the Luna incident.”

Domestic exchanges have taken the brunt of the blame for letting investors trade Terra (LUNA) as it crashed. The number of Korean LUNA holders grew by 180% between May 6 and May 18th from 100,000 to about 280,000. In that time, the Terra USD (UST) stablecoin had de-pegged and LUNA fell from over $60 to under $0.01. The new guidelines would aim to prevent exchanges from allowing investors to trade such highly volatile tokens by shutting down trading within 24 hours or delisting them entirely.

On the other hand, a local report from News1 on Wednesday stated that exchanges could be losers in the long-run if the guidelines are established. The report opined that the stringent new listing guidelines would hamper the exchanges’ ability to generate revenue from altcoin listings:

“Domestic exchanges often secure profits by listing altcoins that are not listed by competitors because altcoin trading volumes are quite high.”

Korea’s exchanges have been sharing the spotlight with the South Korean founder and CEO of Terraform Labs, Do Kwon. Kwon has been under investigation by the feared Financial and Securities Crime Investigation Team, otherwise known as the Grim Reapers of Yeoui-do, for alleged malfeasance and tax evasion.

Related: Appeals court rules Do Kwon, Terraform Labs must heed SEC subpoena served in September

On Wednesday, the Grim Reapers uncovered documents from the Seoul tax office which they claimed and confirmed that Kwon and Terraform Labs evaded about $40 million in corporate and income taxes in 2021, according to The JoongAng news outlet.

Kwon has denied the allegations of money laundering and tax evasion, including one claiming he has cashed out over $2.7 billion over the past three years from the Terra ecosystem. However, the United States Securities and Exchange Commission still wants to see Kwon at the U.S. Court of Appeals on charges of selling unregistered securities through the Mirror Protocol.

LUNA2 traders are increasingly short despite 67.5% rally, $4 million liquidated

Downside pressure for Terraform Labs’ LUNA2 mounts amid investigations and rumors from a “Terra insider.”

Terra (LUNA2) reversed a portion of the losses this June 9 as its price per token rose by as much as 67.5% on the day, catching many traders off-guard with their perpetual swap positions.

LUNA2 traders are shorting it

In detail, LUNA2’s price soared from $2 to as high as $3.58. The volatile intraday move coincided with the liquidation of nearly $4 million worth of LUNA2 trades on Binance and Bybit, including $2.46 million worth of short positions, data from Coinglass shows.

Total LUNA2 liquidations. Source: Coinglass.com

Interestingly, LUNA2’s funding rates across Binance and Bybit remained negative, suggesting that traders are still short despite the price bounce. 

LUNA2 funding rates history. Source: Coinglass.com

Shadow wallets FUD

The downside sentiment in the LUNA2 market has strengthened largely because of its underperformance in recent weeks, led by its association with Terra, an algorithmic stablecoin project whose native tokens LUNA Classic (LUNAC; formerly known as LUNA) and TerraUSD (UST) collapsed in May.

Terraform Labs (TFL), the firm behind the Terra blockchain, formed LUNA2 from the ashes of the $40 billion project. It distributed the revamped token among investors who had suffered losses from their LUNC and UST investments via an airdrop.

As it appears, those LUNA2 recipients decided to dump the token to recover some of their losses, thus pushing its price down by 85% less than two weeks after it peaked at $12.24.

LUNA2/USD daily price chart. Source: TradingView

Investors are also likely keeping their distance from LUNA2 amid allegations that Do Kwon, the founder/CEO of TFL, has lied about having zero LUNAC tokens. Notably, a self-proclaimed Terra insider, known by the pseudonym “FatMan,” claims that TFL and Kwon own 42 million LUNA worth over $200 million.

The user also revealed five “shadow wallets” that hold 42.81 million LUNA2 (worth over $110 million at June 9’s price), noting that they all belong to Kwon.

“[Do Kwon] used his shadow wallet to approve *his own proposal* through governance manipulation (TFL is not supposed to vote), told everyone it would be a community-owned chain, and then gave himself a nine-figure score,” Fatman alleged, adding:

“These are just the verified wallets — there are many others.”

TFL, Kwon under investigation

LUNA2 struggles because of the growing scrutiny around TFL, particularly after it was alfined $78 million by South Korea’s tax regulator in May. 

Related: Anchor dev claims he warned Do Kwon over unsustainable 20% interest rate

What’s more, South Korean prosecutors and police have launched an investigation following allegations that a TFL employee embezzled an undisclosed amount of Bitcoin (BTC) fro the company.

Additionally, the U.S. Securities and Exchange Commission (SEC) is also investigating whether TFL’s crypto tokens are illegal unregistered securities.

As a result, LUNA2’s price has a high chance of heading lower in June with the ongoing problems for TFL, legal pressures and overall bearish sentiment. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Anchor dev claims he warned Do Kwon over unsustainable 20% interest rate

Mr. B alleges that the platform was designed only to offer an interest rate of 3.6%, but that changed at the last minute.

Anchor Protocol was originally designed to offer an interest rate of 3.6%, but this was dialed up to 20% just a week before release to attract more investors, a core developer alleged in an interview with Korean media outlet JTBC. 

“I did not know that this would go out with such a high-interest rate. Set to 20% just a week before the release,” said the employee, referred to only as Mr. B in the Korean report:

“I thought it was going to collapse from the beginning (I designed it), but it collapsed 100%.”

Mr. B said that the platform was designed only to offer an interest rate of 3.6%, and this was a key component of keeping the Terra ecosystem stable as it took into account the available funds in Anchor’s war chest.

Mr. B revealed, however, that a week before launch, the developers found out that the plans had been changed, giving investors access to a very high 20% interest for locking up their TerraUSD Classic (USTC) stablecoins in the Anchor Protocol instead.

The JTBC also claimed that it had obtained internal design documents made by Terraform Labs, which wrote about attracting investors with high-interest rates.

The developer said he attempted to take this issue up with Terra Luna founder Kwon Do-Hyung (Do Kwon) just ahead of the launch in April 2019:

“Just before the release, I suggested to CEO Kwon Do-Hyung that the interest rate should be lowered, but it was not accepted.”

The dramatic fall of Luna Classic (LUNC) and the algorithmic stablecoin USTC has led to plans by the South Korean government to launch a new Digital Asset Committee in June to serve as a watchdog over the country’s crypto industry responsible for policy preparation and supervision.

Do Kwon has been summoned to attend a parliamentary hearing on the matter in South Korea in mid-May.

Related: Law Decoded, May 30–June 6: Terra’s aftermath in China, Japan and South Korea

He has also found himself in hot water after court documents revealed he dissolved Terraform Labs Korea just days before the Terra crash.

In May, South Korean authorities also reportedly issued subpoenas to employees of Terraform Labs, looking into whether there was intentional price manipulation and whether the tokens went through proper listing procedures.

Despite this, the Terra co-founder has managed to relaunch the collapsed network on May 28 with a new chain called Terra 2.0, also known as Pheonix-1, aimed at reviving the fallen LUNA.