LUNC

Do Kwon lawyers received $7 million before Terra collapse: Report

While trying to tie in Kwon’s ill intent in prepaying the law firm, prosecutors believe that the information will help in the ongoing fraud case.

South Korean prosecutors confirmed that Terraform Labs CEO Do Kwon sent 9 billion won ($7 billion) to Kim & Chang — a top South Korean law firm — right before the spectacular collapse of the Terra ecosystem. 

Kwon’s decision to send millions to the law firm was flagged by prosecutors as a deliberate move, which allegedly reaffirmed his awareness of the impending collapse and anticipated expected legal problems, as reported by KBS News.

While trying to tie in Kwon’s ill intent in prepaying the law firm, prosecutors believe that the information will help in the ongoing fraud case. In addition, Kim & Chang’s lawyers visited Montenegro to meet with Kwon and Terraform’s former chief financial officer, Han Chang-joon.

Previously, Kwon was arrested at Podgorica airport in Montenegro after trying to fly to Dubai using fake documents. Following his arrest, both United States and South Korean authorities have sought Kwon’s extradition. However, the court is yet to decide.

Related: Terra co-founder in S.Korean crosshairs following Do Kwon arrest

On April 7, it was revealed that South Korean prosecutors suspected Kwon of converting illicit funds from Terra (LUNA) to Bitcoin (BTC). The prosecutors requested Binance to halt all withdrawal requests linked to Kwon.

In total, prosecutors identified 414.5 billion won ($314.2 million) in illicit assets associated with Terraform Labs co-founder Kwon and his associates, out of which about 91.4 billion won ($69 million) is reportedly directly linked to Kwon.

“We provided Korean LE authorities with the requested assistance. Since we cannot comment on ongoing LE investigations, for any further comment, please reach out to the prosecutors,” said a Binance spokesperson, speaking to Cointelegraph about the matter.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

Terra DeFi project Terraport suffers $2M hack days after launch

Terra users are losing another round of funds due to a breach on the new DeFi platform Terraport Finance, which launched on March 31.

The algorithmic stablecoin TerraUSD (UST) collapsed almost one year ago, but some Terra-related projects are still live and trying to overcome some issues.

Terraport Finance, a decentralized finance (DeFi) exchange project based on the Terra Classic blockchain, suffered a breach on its liquidity wallet on April 10. Announcing the news on Twitter, Terraport said the hacker had drained all liquidity pools from the platform, causing losses of about $2 million worth of digital assets.

“We are currently working with community members and major exchanges to secure as many of these funds as possible and blacklist wallets. All funds have been tracked,” Terraport stated.

According to social media reports, the Terraport hacker has allegedly transferred the stolen funds to exchanges Binance and MEXC Global. The investigators have urged the exchange’s security teams to freeze the assets as soon as possible.

While Terraport has been investigating the security issue and preparing an incident report, many online crypto enthusiasts have stood up to criticize the rushed launch of Terraport.

Following a token sale in February and March 2023, ​​TerraCVita launched its Terra Classic-based decentralized exchange, Terraport, on March 31. By April 7, Terraport burned nearly 100 million Luna Classic (LUNC) tokens in an attempt to revitalize Terra after it failed one year ago.

“What was for that hurry to launch to have two months presale?” one commentator called out on Twitter, stating that the answer to this question is the key to understanding the project’s driving force.

Some industry observers also alleged that Terraport went live without completing an audit, which triggered more complications.

The crypto community has also expressed outrage against influencers who have been involved in promoting Terraport before it suffered an exploit.

Related: DeFi exploits and access control hacks cost crypto investors billions in 2022: Report

According to LUNC enthusiast Levi Rietveld, some influencers like ClassyCrypto removed their LUNC-related promoting content soon after the platform was hacked. “Things are extremely fishy and its likely someone on the Terraport team rugged,” Rietveld stated.

Emerged largely in 2021, the DeFi industry continues to struggle in terms of security and infrastructure vulnerabilities, with new DeFi incidents coming up almost every day. One of the latest such incidents happened on April 8, with DeFi protocol SushiSwap losing more than $3 million due to a bug on the smart contract that aggregates trade liquidity.

Magazine: Asia Express: Zhu Su’s exchange did $13.64 in volume akshually, Huobi in crisis

Terra co-founder in S.Korean crosshairs following Do Kwon arrest

Authorities have previously alleged that Shin earned roughly $105 million in profits from illegal sales of LUNA tokens before Terra’s collapse.

Following Terraform Labs’ co-founder Do Kwon’s arrest in Montenegro while trying to board a plane using fake documents, South Korean authorities have turned up efforts to track down and arrest Shin Hyun-Seong, also known as Daniel Shin — Terra’s other co-founder.

Since November 2022, South Korean authorities have suspected the involvement of numerous Terra colleagues in helping Do Kwon promote unstable and uncertain investment opportunities with Terra (LUNA) and TerraUSD (UST) tokens.

However, after Kwon’s arrest on March 23, 2023, South Korean prosecutors are making a fresh attempt at Shin’s arrest, suggests a Bloomberg report. It reads that the prosecutors are undertaking a renewed push to detain Shin. However, no official announcement has been made public in this regard.

Authorities have previously alleged that Shin earned roughly $105 million in profits from illegal sales of LUNA tokens before Terra’s collapse. On the other hand, Shin claims to have had no involvement in Terra after January 2020, as evidenced by his LinkedIn profile.

Co-founder of Terraform Labs, Daniel Shin’s professional experience overview. Source: LinkedIn

Arrest warrants were also subsequently sought for Shin, along with three investors and four engineers. Charges against the co-founder include fraud, breach of duty, violation of capital markets law and illegal fundraising.

Related: Do Kwon faces fraud charges from US prosecutors hours after arrest

After getting caught using fake travel documents, Kwon was detained by Montenegro authorities for a standard 72 hours. However, upon request by the authorities, the Montenegrin court approved the extension of Kwon’s detention by 30 days.

Claiming there was no intended use of fake documents, one of Kwon’s legal representatives plans to appeal the court’s decision and seek a reduction in detention time. The court considered Kwon a foreign national whose identity was not clearly identified.

Magazine: ‘Terra hit us incredibly hard’: Sunny Aggarwal of Osmosis Labs

Do Kwon to reportedly appeal against court’s decision to extend detention

A legal representative of Kwon confirmed the appeal against the Montenegrin court’s decision to detain the entrepreneur for 30 days longer than usual.

Following his arrest in Montenegro while attempting to fly using fake documents, Terraform Labs co-founder Do Kwon will reportedly appeal the court’s decision to extend detention time for up to 30 days.

A legal representative of Kwon confirmed the appeal against the Montenegrin court’s decision to detain the entrepreneur for longer than usual, according to local media Vijesti. The decision was made after Kwon was caught using fake documents at Podgorica airport while trying to fly to Dubai.

While Montenegro authorities typically allot detention for up to 72 hours, Kwon’s 30-day extension was approved after prosecutors highlighted the high possibility of an escape. The court considered that Kwon was a foreign national whose identity was not clearly identified.

Since the collapse of the Terra ecosystem, Kwon has been suspected of moving between Singapore, Dubai and Serbia by South Korean authorities.

Related: South Korea seizes $104M from Terra co-founder suspecting unfair profits

On March 23, a few hours after Kwon’s arrest in Montenegro, United States prosecutors in New York charged the entrepreneur with fraud.

As Cointelegraph reported, the 31-year-old was charged with eight separate counts, including commodities fraud, securities fraud, wire fraud, and conspiracy to defraud and engage in market manipulation.

Magazine: SEC targets Coinbase, Do Kwon arrested and FTX sells $95M in Mysten Labs: Hodler’s Digest, March 19–25

Terra accidental airdrop leads to smear campaign, community member claims

TFL claimed that the airdrop receiver refused to return the funds, while the user claimed that he was on the verge of settlement with the firm when the former decided to run a smear campaign.

Terraform Labs (TFL), the firm behind the now defunct algorithmic stablecoin TerraUSD (UST) and its co-founder Do Kwon are back in the limelight for allegedly running a smear campaign and issuing threats against one of their community members.

It all started in May 2022 with the genesis airdrop planned after the original ecosystem imploded in the wake of its stablecoin depeg. In a series of tweets, TFL claimed that Jimmy Le, a community member entrusted with Terra funds, has refused to return funds gained during the genesis airdrop.

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The tweets noted that the newly minted token, Terra (LUNA), was airdropped to individuals holding the original native token, now called Terra Classic (LUNC). However, an error with CW3 multisig wallets resulted in individual signers receiving LUNA airdrops they should not have.

TFL claimed that all other multisig singers returned the accidental airdrop except for Le, who, despite their best efforts, is yet to cooperate with them.

Le, the individual accused of not returning the accidental airdrop, responded to the TFL Twitter thread on Jan. 9 and accused them of running a smear campaign against him. He said the firm has deliberately chosen to present one side of the story and lied about their interactions. He claimed that he did not refuse to return the accidental airdrop but wanted to make sure about the tax implications because of the tokens he had received.

Related: 10 crypto tweets that aged like milk: 2022 edition

He also clarified that he transferred the liquid portion of the airdrop (around $1-1.5 million) to the multisig wallet specified by TFL and none of the airdropped tokens has ever been undelegated or sold. But later, he discovered that the chain upgrade did not reset his vesting balances to the community pool but enabled the manual transfer of vesting tokens to the community pool. This made him revisit his tax concerns.

Le claimed that tax-related conversations with TFL continued until December 2022, before TFL suddenly posted the Twitter thread on Jan. 6. He claimed that the smear campaign caught him off guard because they were in the process of a settlement.

He also allegedly shared personal messages from TFL co-founder Kwon threatening him with various consequences, including personal safety. One of the messages read:

“Just make it right. It’s not worth the hassle and endangerment this will bring to your life and/or reputation going forward. That’s all I’m gonna say anymore on the subject. I will NOT be involved in hunting you down btw. I don’t care that much. Just thought I’d give u heads up. Good luck. You’ll prob need lots of it if you try to abscond.”

The clarification from Le and the alleged messages from Kwon riled up the crypto community, especially Fatman, a Twitter handle dedicated to the Terra fiasco.

Fatman lauded Le and took a potshot at Kwon, saying that someone who tried illegally selling United States securities and is on the run from Interpol should not threaten others for getting legal and tax advice. He added, “don’t take financial advice from Do Kwon. It’s always the right play.”

Cointelegraph reached out to TFL, Kwon and Le to get more clarification on the issue, but they didn’t respond by the time of publication.

Terra co-founder Do Kwon hiding out in Serbia, authorities say

South Korean authorities have requested cooperation from the Serbian government in order to bring Kwon back to face charges in South Korea.

The global manhunt for Terraform Labs’ controversial founder and CEO Do Kwon continues to rage on, with South Korean authorities now believing he’s in Serbia after leaving Singapore in September.

According to a Dec. 11 report from Chosun Media, South Korean authorities followed a tip-off concerning Do Kwon’s whereabouts suggesting he is now in Serbia and has been able to confirm it. 

“Recently, we obtained intelligence that CEO Kwon was in Serbia, and it was found to be true,” an official told the outlet. 

The report also states that South Korea’s Ministry of Finance “is in the process of requesting cooperation from the Serbian government” as part of the investigation.

South Korean authorities have been on the hunt for Do Kwon since Terra’s collapse, but haven’t seemed to have had much luck pinpointing his location until now.

The 31-year-old was understood to have moved to Singapore toward the end of April, just before the Terra ecosystem’s shock collapse.

On Sept. 14, the Seoul Southern District Prosecutor’s Office’s Financial and Securities Criminal Unit issued an arrest warrant against Kwon for allegedly violating South Korean capital markets laws.

Around that time, authorities in Singapore confirmed that Kwon was no longer in the country, and was understood to have flown to Dubai in transit to a new unknown destination. 

Shortly after that, on Sept. 26, Interpol also reportedly issued a “Red Notice” against Kwon. As of Dec. 11, however, Do Kwon doesn’t appear to have been added to Interpol’s Red Notice database on the website. 

On Oct. 6, South Korea’s Ministry of Foreign Affairs issued an order for Kwon to surrender his passport. The ministry added that failure to comply would result in the cancellation of his passport altogether.

Later that month, prosecutors in South Korea confirmed reports that Do Kwon had flown to Dubai for a possible stopover before heading to another destination — which, as it turns out, might have been Serbia. 

If Do Kwon turns out to be in Serbia, it remains to be seen what, if any, legal strings can be pulled from South Korea to try to extradite the Terraform Labs founder.

While South Korea has entered into a bilateral extradition treaty with 31 countries, Serbia is not among them. However, South Korea has also entered into a much broader multilateral extradition treaty with the Council of Europe, to which Serbia is a signatory.

Related: Terra co-founder Do Kwon faces $57-million lawsuit in Singapore

Kwon has maintained that he is not “on the run” and has been “making zero effort to hide.” He’s continued to be active on social media over the last few months.

The collapse of the Terra ecosystem in May was partly triggered by the depegging of its algorithmic stablecoin Terra USD Classic, USTC (formerly UST), which in turn brought down its sister asset Luna Classic, LUNC (formerly LUNA) by nearly 100%.

Cointelegraph reached out to representatives for Terraform Labs for comment but did not receive an immediate response.

FTX’s Bankman-Fried to face market manipulation probe, Do Kwon chimes in

As part of a broader inquiry into FTX’s collapse, federal prosecutors are looking at the role that FTX and Alameda may have played in the fall of Terra.

United States federal prosecutors have reportedly begun investigating whether the collapse of the Terra ecosystem was in fact triggered by market manipulation tactics by former FTX CEO Sam Bankman-Fried.

According to a Dec. 7 report from The New York Times (NYT), the prosecutors — as part of a broader inquiry into FTX’s own collapse — are investigating whether Bankman-Fried’s empire intentionally caused a flood of “sell” orders on Terra’s algorithmic stablecoin TerraUSD Classic (USTC), formerly TerraUSd (UST).

The sudden increase in UST sell orders were said to make it difficult to match them with corresponding “buy” orders, which in turn forced more downward price pressure on UST, causing it to depeg from its intended 1:1 ratio with the U.S. dollar.

The events also led to the fall of Terra’s native token, Terra Classic (LUNC), formerly LUNA, as the two cryptocurrencies were designed to be linked.

But while no one has been able to precisely determine the root cause behind the collapse of LUNC and USTC in May, it is known that the majority of the USTC sell orders came from Bankman-Fried’s trading firm Alameda research, according to the NYT.

A person with knowledge on the matter also told NYT that Alameda Researched also placed a big bet on the price of LUNC falling.

Like with most comments Bankman-Fried has shared since FTX’s collapse, the former CEO claimed that he was “not aware of any market manipulation and certainly never intended to engage in market manipulation,” according to NYT.

“To the best of my knowledge, all transactions were for investment or for hedging,” he added.

Related: The nightmare continues for Sam Bankman-Fried and FTX — Law Decoded, Nov. 14-21 

Responding to the recent report, Terraform Labs CEO Do Kwon shared his thoughts on the matter to his 1 million Twitter followers in a Nov. 8 tweet, who suggested it was time for Genesis Trading come clean about an alleged  $1 billion loan in UST to “SBF or Alameda” shortly before Kwon’s Terra ecosystem crashed.

Kwon also stated that a large currency contraction that UST underwent in Feb. 2021 was started by Alameda “when they sold 500mm UST in minutes to drain its curve pools during the MIM crisis.”

“What’s done in darkness will come to light,” Kwon added on the matter.

South Korea issues arrest warrant for Do Kwon’s former colleagues

Arrest warrants were sought for Terraform Labs co-founder Daniel Shin, three investors and four engineers responsible for TerraUSD (UST) and LUNA initiatives.

Amid the ongoing manhunt for Terraform Labs co-founder and CEO Do Kwon, South Korean authorities have spread out their investigations to target other Terra executives. Prosecutors issued an arrest warrant for co-founder Daniel Shin and seven other engineers and investors of the firm following suspicion of gaining illegal profits before the massive collapse of the Terra ecosystem.

The Seoul Southern District Prosecutors Office in South Korea suspected that Shin possessed Terra (LUNA) tokens, which were pre-issued without the public knowledge of investors. In doing so, Shin allegedly bagged profits worth 140 billion won (roughly $105 million) by selling the pre-issued tokens during the bull market.

Arrest warrants were also sought for three Terraform Labs investors and four engineers responsible for TerraUSD (UST) and LUNA initiatives, confirmed local media Yonhap News Agency. On Nov. 19, South Korean authorities seized assets worth over $104 million from Shin under the same suspicion of making unfair profits.

At the time, Shin’s attorney maintained the counter-narrative, stating that “Reports that CEO Shin Hyun-seong sold LUNA at a high point and realized profits or that he made profits through other illegal methods are not true.”

Speaking against the arrest warrant, Shin pointed out:

“I left (Terraform Labs) two years before the collapse of Terra and Luna, and have nothing to do with the collapse.”

The seizure of funds aimed to minimize further losses for investors in case Shin decided to dispose of the stolen funds. While Kwon maintains that he’s not on the run from South Korean authorities, 4,000 members of a retail investor group are attempting to track down the fugitive’s whereabouts.

On Oct. 6, South Korea’s Ministry of Foreign Affairs ordered Kwon to surrender his passport, which, if not done, would result in the permanent cancellation of his passport. The deadline has passed since.

Related: Terra Labs, Luna Guard commission audit to defend against allegations of misusing funds

A local report from South Korea claimed that prosecutors obtained evidence regarding Kwon’s order to manipulate the price of Luna Classic (LUNC). However, a Terraform Labs spokesperson dismissed the allegations when speaking to Cointelegraph, highlighting their disappointment in seeing “the Korean prosecutors continue to try to contort the Capital Markets Act to fit their agenda and push baseless claims.”

Unconfirmed reports suggest that Kwon moved from South Korea to Singapore before ultimately transitioning to Dubai, United Arab Emirates.

Binance burns $1.8M in LUNC trading fees following community proposal

According to the crypto exchange, the burn was the equivalent of 1,863,213.47 USDT — roughly 5.5 million LUNC.

Cryptocurrency exchange Binance has announced it completed the first burn of Terra Classic tokens’ trading fees in response to a community proposal from September.

In an Oct. 3 update, Binance CEO Changpeng Zhao said the exchange had burned roughly $1.8 million worth of Terra Classic (LUNC) — formerly Terra (LUNA) — trading fees for LUNC/BUSD and LUNC/USDT spot and margin trading pairs. According to Binance, the burn included the equivalent of 1,863,213.47 Tether (USDT) — roughly 5.5 million LUNC.

The exchange’s original announcement from Sept. 26 said the burns would be completed every Monday — making the next event on Oct. 10 — sending trading fees to a LUNC burn address. Many in the Terra community proposed the burn strategy as part of efforts to revive LUNC, whose price had dropped to almost zero in May and briefly surged by more than 250% in September.

Related: Do Kwon shares LUNA burn address but warns ‘LUNAtics’ against using it

Terraform Labs co-founder Do Kwon, whom many in the crypto space want held to account for his role in Terra’s collapse, has been targeted by South Korean authorities for allegedly violating the country’s capital markets laws. A warrant has been issued for his arrest and Interpol added Kwon’s name to its Red Notice list, requesting that local law enforcement — many have suggested he may be in Singapore — detain the Terra co-founder. At the time of publication, Kwon’s whereabouts are unknown, but he said on Twitter on Sept. 26 that he was “making zero effort to hide.”

Terraform Labs claims case against Do Kwon is ‘highly politicized:’ WSJ

A spokesperson for the company behind Terra said it believes prosecutors heeled to public pressure and expanded the definition of a security after its associated cryptocurrencies collapsed.

Terraform Labs, the company behind the development of the Terra blockchain said South Korea’s case against its co-founder Do Kwon has become political, alleging prosecutors expanded the definition of a security in response to public pressure.

“We believe that this case has become highly politicized, and that the actions of the Korean prosecutors demonstrate unfairness and a failure to uphold basic rights guaranteed under Korean law,” a Terraform Labs spokesman said to the Wall Street Journal on Sept. 28.

South Korean prosecutors issued an arrest warrant for Kwon on Sept. 14 for violations of the countries capital markets laws, but Terraform Labs laid out a defense arguing Terra, now known with its new token, Luna Classic (LUNC), isn’t legally a security, meaning it isn’t covered by capital markets laws.

The spokesman alleged prosecutors of expanding the definition of a security due to intense public pressure from the collapse of Terra and its connected algorithmic stablecoin TerraUSD (UST), now known as TerraUSD Classic (USTC):

“We believe, as do most in industry, that Luna Classic is not, and has never been, a security, despite any changes in interpretation that Korean financial officials may have recently adopted.”

The argument by Terraform Labs’ stems from the unclear regulatory status of cryptocurrencies and the companies who create and issue them.

Currently, capital market and electronic securities’ systems in the country don’t include a legal definition of non-standardized securities issued through a blockchain.

Related: South Korea’s financial watchdog wants to ‘quickly’ review crypto legislation

The country is moving to regulate the space with its financial regulator, the Financial Services Commission (FSC) preparing guidelines for security tokens by the end of 2022.

A leaked government report in May further revealed South Korea’s plans to roll out a crypto framework by 2024.

Kwon’s whereabouts remain unknown and Terraform Labs did not comment on his location citing physical security risks, but Kwon says he’s not making an effort to hide even after a notice was sent to global authorities by Interpol.