LUNA

Breaking: Interpol ‘Red Notice’ issued for Do Kwon — South Korea prosecutors

The Terraform Labs co-founder faces charges in South Korea relating to the crash of the Terra ecosystems’ cryptocurrencies.

Interpol has reportedly issued a “Red Notice” to law enforcement worldwide for the arrest of Terraform Labs co-founder Do Kwon.

South Korean prosecutors in Seoul on Monday told Bloomberg the international policing organization issued the notice in response to charges Kwon faces in South Korea related to the collapse of the Terra ecosystem.

The news comes only a week after South Korean prosecutors reportedly asked Interpol to issue a “Red Notice” for Kwon on Sept. 19.

A Red notice is a “request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action” according to the Interpol website.

It also comes less than two weeks after South Korean authorities issued an arrest warrant for Kwon and five other associates for alleged violations of the country’s capital markets laws.

Kwon was previously believed to have been residing in Singapore, but local authorities said on Sept. 17 he wasn’t in the country, with Kwon saying hours later he wasn’t “on the run,” though he didn’t reveal his location.

Related: South Korea issues arrest warrant for Terra founder Do Kwon

The Terra ecosystem Kwon co-founded crashed after its algorithmic stablecoin TerraUSD (UST) (now TerraUSD Classic (USTC) lost its United States dollar peg in May, causing billions of dollars worth of liquidations across the cryptocurrency market.

Terra co-founder Do Kwon says he’s not ‘on the run’

Kwon didn’t reveal his whereabouts in a series of Tweets responding to claims he fled Singapore after an arrest warrant was issued on Wednesday.

Do Kwon, the co-founder of the Terra ecosystem, took to Twitter on Saturday asserting he’s “not ‘on the run’ or anything similar” after the Singapore Police Force (SPF) said Kwon wasn’t in the city-state.

On Sept. 14, South Korean authorities issued an arrest warrant for Kwon and five other associates for alleged violations of the country’s capital markets laws. All were known to be in Singapore at the time, with prosecutors also attempting to revoke their passports a day later on Thursday.

“For any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide,” Kwon tweeted.

Kwon did not reveal where he was, saying Crypto Twitter has “no business knowing my GPS coordinates.” He added they are defending themselves in “multiple jurisdictions” and look forward to “clarifying the truth over the next few months.”

Singapore does not have an extradition treaty with South Korea, but the SPF stated it will assist Korean authorities within the scope of its domestic laws and international obligations and didn’t provide any further details.

In May, the Terra ecosystem Kwon co-founded arguably had the biggest crash in cryptocurrency history after its algorithmic stablecoin TerraUSD Classic (USTC), originally TerraUSD (UST), lost its United States dollar peg to hit a low of $0.006 in June.

Its sister asset, now known as Luna Classic (LUNC) met a similar fate with an all-time low of $0.0000009 in May after hitting its all-time high of over $119 the month prior. The twin collapses caused panic among traders, with selling pressure leading to a wider collapse in the digital asset market.

Related: Collapse of Terra blockchain ecosystem forces talent migration

Previously, South Korean prosecutors banned Terra employees from leaving the country in June to stop the possibility of them fleeing to avoid investigation, Do Kwon was already residing in Singapore at the time.

In July, South Korean authorities raided 15 firms, including seven crypto exchanges connected to the collapse of Terra reportedly gaining access to data related to USTC and LUNC transactions.

Terra back from the dead? LUNA price rises 300% in September

The incredible LUNA rally took place amid a flurry of positive and negative events while technicals suggest a correction is coming.

Terra has become a controversial blockchain project after the collapse of its native token Terra (LUNA) and stablecoin TerraUSD (UST) in May. But, its recent gains are hard to ignore for cryptocurrency traders. 

LUNA rising from the dead?

 LUNA’s performance in September is particularly interesting, given it has rallied by more than 300% month-to-date after a long period of sideways consolidation.

LUNA/USDT daily price chart. Source: TradingView

It is vital to note that LUNA also trades with the ticker LUNA2 across multiple exchanges.

In detail, Terraform Labs, the firm behind the Terra project, divided the old chain into Terra Classic (LUNC) and Terra LUNA 2.0 (LUNA/LUNA2).

Related: Do Kwon reportedly hires lawyers in S. Korea to prepare for Terra investigation

Terra Classic is the original version of the Terra blockchain, while LUNA 2.0 was created as a part of a regeneration strategy by Terraform Labs founder Do Kwon. In doing so, Kwon and his team periodically airdrop the LUNA2 tokens to users affected by Terra’s collapse.

LUNA/LUNA2 started pumping on Sept. 9, the day on which many things happened inside the Terra ecosystem.

First, Luna Classic (LUNC) passed governance proposals to add a 1.2% tax on all its on-chain transactions on the day. In other words, the proposals will permanently remove 1.2% of the LUNC supply from each on-chain transaction, as Cointelegraph covered.

Second, a self-proclaimed Terra whistleblower, FatMan, reported a suspicious transaction worth 435,000 LUNA2 tokens to Binance, alleging that the sender is TerraForm Labs:

“Was eating lunch [and] saw LUNA2 pump. Checked the TFL Dawn wallet. Sure enough, after months of farming rewards with the airdrop they claim they never received, they sent all 435K available LUNA 2 to Binance just days ago. That’s just one address.”

However, Do Kwon dismissed the allegations.

The Sept. 9 pump also occurred a week after Terra passed the proposal to conduct its second airdrop of over 19 million LUNA tokens until Oct. 4.

LUNA price technicals lean bearish

From a technical perspective, LUNA’s price risks undergoing a massive correction in the coming days.

Firstly, on the four-hour chart, the token’s relative strength index (RSI) has jumped above 70, which is considered overbought territory where a correction becomes more likely. Secondly, the price has been forming a rising wedge, or a bearish reversal pattern, since Sept. 9.

LUNA/USDT daily price chart featuring rising wedge breakdown setup. Source: TradingView

Notably, a rising wedge forms when the price trends higher inside an ascending range whose upper and lower trendlines converge toward one another. It resolves after the price breaks below the lower trendline together with a rise in trading volume.

As of Sept. 11, LUNA was testing its wedge’s lower trendline for a potential breakdown move. In this case, the price will risk falling by as much as the wedge’s maximum height.

In other words, LUNA could drop to $4.5, down 30% from the price on Sept. 11.

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.

‘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.

Contagion only hit firms with ‘poor balance sheet management’ — Kraken Aus boss

The crypto contagion only hurt entities that poorly managed their treasuries, but didn’t affect the underlying blockchain technology, he said.

The crypto contagion sparked by Terra’s infamous implosion this year only spread to companies and protocols with “poor balance sheet management” and not the underlying blockchain technology, says Kraken Australia’s managing director Jonathon Miller.

Speaking with Cointelegraph, the Australian crypto exchange head argued that sectors such as Ethereum-based decentralized finance (DeFi) revealed its fundamental strength this year by weathering severe market conditions:

“Some of the contagion that we saw across some of the lending models in the space, [was in] this traditional finance kind of lending model sitting on top of crypto. But what we didn’t see is a kind of catastrophic failure of the underlying protocols. And I think that’s been recognized by a lot of people.”

“Platforms like Ethereum did not fail when the volatility hit. You saw decentralized markets, decentralized lending models, DeFi in general, not fall over. There was no contagion there. What you saw was poor balance sheet management from closed shop trade fee lenders,” he added.

Miller’s comment comes despite CoinGecko reporting a 74.6% market cap decline in DeFi during Q2 2022 following the collapse of Terra and a rise in DeFi exploits. Though the crypto data aggregator also noted that the industry managed to retain most of its daily active users. 

Miller also added that blockchain projects only ran into issues when the design of their underlying protocols was “obviously poor,” such as the case of Terra’s algorithmic stablecoin TerraUSD Classic (USTC).

“I think that’s a trade off. There’s a Treasury management problem, not a blockchain problem,” he said.

Questioned about how Kraken fared through the crypto bear market this year, Miller suggested the company was well primed to deal with the volatility. He noted that the company has survived many downturns in its 11-year history and notably didn’t blow a lot of money on marketing during the bull run last year.

“We’re in a slightly different position as perhaps some of the other exchanges that have been out there spending lots of money on advertising. We’ve got a really strong word-of-mouth business model,” he explained.

Related: Crypto contagion deters investors in near term, but fundamentals stay strong

Miller was also optimistic about the current state of the Australian crypto sector, stating that there are a lot of “bullish underlying signals from businesses who are still building products.”

He pointed to major banks such as ANZ recently testing the use of its own stablecoin on Ethereum and major payments giants such as Mastercard joining the Blockchain Australia Association, signaling strong “intent to become involved in crypto and blockchain.”

“So you know, institutions making use of the underlying tech, maybe some heat out of some of the speculative characteristics, that we saw through 2022, which is potentially even a good thing.”

Korean startup Uprise lost $20M shorting LUNC

The crypto custodial service and AI trading platform managed to lose nearly all of its customers’ assets by shorting LUNC, the Terra Classic native token.

South Korean crypto investment startup platform Uprise reportedly lost around 99% of its assets worth about $20 million when it got liquidated shorting the Luna Classic (LUNC) token.

Uprise’s trading desk Heybit uses an artificial intelligence (AI) trading system that was designed to reduce the risks associated with leveraged trading.

Local news outlet Seoul Economic Daily reported on Wednesday that Uprise’s AI, which it calls a robo-advisor, made a disastrous misread in May on LUNC as it fell precipitously from $60 to fractions of a cent. The system shorted LUNC but got liquidated during the token’s bizarre price pumps along the way, leading to $20 million in customer losses and $3 million of its own losses. In total, Uprise lost about 99% of its assets.

Most users of Uprise’s Heybit service are high-net-worth individuals and corporations who stake their crypto for yield generated by the AI trading on futures markets. The firm has been backed by the Hashed crypto investment firm, Kakao Ventures and several banks and venture capital firms.

The firm has suspended services, but has not issued an official disclosure to its clients about the losses. An Uprise official confirmed to Seoul Economic Daily that:

“Due to great unexpected volatility in the market, there has been damage to customer assets. We plan to finalize the report on our virtual asset business soon.”

In addition to officially notifying its users, Uprise officials are reportedly working on a compensation plan for its customers so that it can continue to operate.

Related: Korea and US agree to share investigation data on Terra

With Uprise in the spotlight, Seoul Economic Daily pointed out that it has not registered as a virtual asset service provider (VASP). It reported that Uprise officials feel that the firm is able to skirt the law requiring it to register as a VASP because it does not collect Korean Won nor directly invest in virtual assets, only futures.

Registration helps keep crypto exchanges in compliance with the notorious Travel Rule from the Financial Action Task Force.

Uprise is the latest centralized crypto service provider to reveal significant losses stemming from the Terra incident and subsequent contagion. It joins BlockFi, Celsius, and Voyager Digital among the list of firms that have had to take drastic measures to try and stay afloat. FTX US exchange has the option to buy BlockFi, Celsius has been unwinding loans, and Voyager filed for bankruptcy on Tuesday.

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.