Price Manipulation

South Korean prosecutors accuse Do Kwon of manipulating Terra’s price

Prosecutors have reportedly secured a “messenger conversation” in which Kwon ordered an employee to manipulate Terra’s market price.

A local report from South Korea claims that the country’s prosecutors have obtained evidence to suggest Terraform Labs co-founder Do Kwon had onceordered an employee to manipulate the price of Terra Luna Classic (LUNC).

A report by Korean Broadcasting System (KBS) on Nov. 3 quotes an official from the South Korean Prosecutors Office, who said they have obtained a “conversation history” in which “CEO Kwon specifically ordered price manipulation.”

The reported evidence came in the form of a “messenger conversation” between Kwon and a former Terraform Labs employee. Prosecutors did not disclose further details, noting: 

“I can’t reveal details, but it was a conversation history where CEO Kwon specifically ordered price manipulation.”

While the exact details of the price manipulation remain undisclosed, the price action of Terra’s LUNC (formerly LUNA) during the last bull market was undoubtedly one of the most impressive across all cryptocurrencies.

Its price rose over 2,800% from $4.18 in late May 2021 to its all-time high of $119.18 on Apr. 5. 2022, before its cataclysmic fall on Apr. 30, according to CoinGecko data.

The report however notes that Kwon’s representative has continued to deny these allegations.

Kwon and his representatives have also previously denied alleged violations of South Korea’s capital markets laws.

In September, Terraform Labs said the case against its co-founder has become “highly politicized” and that prosecutors expanded the definition of a security in response to public pressure.

Kwon’s whereabouts now point to Europe

Kwon’s whereabouts ultimately continue to remain a mystery, despite the Terra ecosystem co-founder previously arguing he is “not on the run.” 

Previous reports have suggested Kwon first moved from South Korea to Singapore, before transitioning to Dubai, United Arab Emirates (UAE). The KBS report now suggests Kwon is residing somewhere in Europe, and as of Nov. 3, without a valid passport. 

“Kwon, who has an arrest warrant, had his passport invalidated as of today,” the report stated, adding: 

“Do Kwon is now an illegal immigrant, wherever he is, in any country, and he cannot travel legally between countries.”

If found, Kwon will also have to deal with a $57 million lawsuit recently filed against him, his fellow Terra co-founder Nicholas Platias and the Luna Foundation Guard (LFG) in the Singapore High Court.

The plaintiff argued that Kwon, Platias and the LFG fraudulently claimed Terra’s stablecoin, Terra USD (UST) — now TerraUSD Classic (USTC) — was “stable by design” and able to maintain its peg to the U.S. dollar.

Related: 4,400 disgruntled investors are hunting for Terra’s Do Kwon

The worldwide law enforcement effort to pinpoint the controversial CEO’s location hasn’t stopped Kwon from being active on social media, with the most recent Twitter post from Kwon shared on Nov. 3.

Cointelegraph reached out to Terraform Labs and the South Korean Prosecutor’s Office for comment but did not receive an immediate response. 

South Korean prosecutors accuse Do Kwon of manipulating Terra’s price

Prosecutors have reportedly secured a “messenger conversation” in which Kwon ordered an employee to manipulate Terra’s market price.

A local report from South Korea claims that the country’s prosecutors have obtained evidence to suggest Terraform Labs co-founder Do Kwon had once ordered an employee to manipulate the price of Luna Classic (LUNC).

A report by Korean Broadcasting System (KBS) on Nov. 3 quotes an official from the South Korean prosecutor’s office, who said they have obtained a “conversation history” in which “CEO Kwon specifically ordered price manipulation.”

The reported evidence came in the form of a “messenger conversation” between Kwon and a former Terraform Labs employee. Prosecutors did not disclose further details, noting: 

“I can’t reveal details, but it was a conversation history where CEO Kwon specifically ordered price manipulation.”

While the exact details of the price manipulation remain undisclosed, the price action of Terra’s LUNC, formerly Terra (LUNA), during the last bull market was undoubtedly one of the most impressive across all cryptocurrencies.

Its price rose over 2,800% from $4.18 in late May 2021 to its all-time high of $119.18 on April 5. 2022, before its cataclysmic fall on April 30, according to CoinGecko data.

The report, however, notes that Kwon’s representative has continued to deny these allegations.

Kwon and his representatives have also previously denied alleged violations of South Korea’s capital markets laws.

In September, Terraform Labs said the case against its co-founder has become “highly politicized” and that prosecutors expanded the definition of a security in response to public pressure.

Kwon’s whereabouts now point to Europe

Kwon’s whereabouts ultimately continue to remain a mystery, despite the Terra ecosystem co-founder previously arguing he is “not on the run.”

Previous reports have suggested Kwon first moved from South Korea to Singapore, before transitioning to Dubai, United Arab Emirates (UAE). The KBS report now suggests Kwon is residing somewhere in Europe, and as of Nov. 3, without a valid passport. 

“Kwon, who has an arrest warrant, had his passport invalidated as of today,” the report stated, adding: 

“Do Kwon is now an illegal immigrant, wherever he is, in any country, and he cannot travel legally between countries.”

If found, Kwon will also have to deal with a $57 million lawsuit recently filed against him, his fellow Terra co-founder Nicholas Platias and the Luna Foundation Guard (LFG) in the Singapore High Court.

The plaintiff argued that Kwon, Platias and the LFG fraudulently claimed Terra’s stablecoin, TerraUSD (UST) — now TerraUSD Classic (USTC) — was “stable by design” and able to maintain its peg to the United States dollar.

Related: 4,400 disgruntled investors are hunting for Terra’s Do Kwon

The worldwide law enforcement effort to pinpoint the controversial CEO’s location hasn’t stopped Kwon from being active on social media, with the most recent Twitter post from Kwon shared on Nov. 3.

Cointelegraph reached out to Terraform Labs and the South Korean Prosecutor’s office for comment but did not receive an immediate response. 

Moola Market attacker returns most of $9M looted for $500K bounty

The attacker has scored about a half-million dollar “bug bounty” after choosing to return a majority of the cryptocurrency they exploited from the Celo-based lending protocol.

An attacker has returned just over 93% of the more than $9 million worth of cryptocurrencies they exploited from the Celo blockchain-based decentralized finance (DeFi) lending protocol Moola Market.

At around 6:00 pm UTC on Oct. 18, the Moola Market team tweeted it was investigating an incident and had paused all activity, adding it had contacted authorities and offered a bug bounty to the exploiter if funds were returned within 24 hours.

Analysis of the exploit by Web3 security company Hacken shows the attacker manipulated the price of the protocols’ low-liquidity native MOO token by initially purchasing around $45,000 worth and depositing it as collateral to borrow Celo (CELO).

The borrowed CELO, along with further CELO provided by the attacker, was then used as collateral to borrow more MOO, driving up the token’s price. The attacker continued repeating this until the MOO token price had increased by 6,400%.

With the inflated token price, the attacker was able to borrow $6.6 million worth of CELO, $1.2 million of MOO, along with $740,000 of Cello Euros (cEUR) and $644,000 Celo Dollars (cUSD), all worth multiples more than their initial posted collateral resulting in the protocol’s loss of around $9.1 million.

Five hours after the initial confirmation of the exploit, Moola Market tweeted it had received just over 93% of the funds exploited, with the attacker seemingly keeping the rest, making around $500,000 as a bug bounty.

Moola Market did not immediately respond to Cointelegraph’s request for comment.

The attack draws similarities to the $117 million exploit suffered by Mango Markets on Oct. 11, in which Avraham Eisenberg and his team manipulated the price of the Solana-based DeFi protocols’ native token to borrow cryptocurrencies with an undercollateralized backing. Eisenberg negotiated to keep $47 million as a “bounty.”

Related: BNB Chain responds with next steps for cross-chain security after network exploit

Multichain cryptocurrency wallet BitKeep also suffered an exploit late on Oct. 17 with an attacker making off with $1 million worth of Binance Coin (BNB) through a service used to swap tokens BitKeep says it will fully reimburse any affected users.

The attacks are the latest in a series of exploits to have taken place in October which has also shaped up to be the biggest month ever for hacking activity with the total hacked value reaching around $718 million up until Oct. 12 according to analytics firm Chanalysis.

Decentralized exchange GMX suffers $565K price manipulation ‘exploit’

A founder of a DEX competitor to GMX said on Sept. 2 that an exploit could be pulled off on GMX which could leave GLP holders short. 16 days later, it happened.

Decentralized exchange (DEX) GMX has reportedly suffered a price manipulation exploit from an exploiter who managed to make off with around $565,000 from the Avalanche (AVAX)/USD market.

The unidentified exploiter is understood to have capitalized on GMX’s “minimal spread” and “zero price impact” features to pull off the exploit, which impacted GLP tokenholders who provided liquidity in the form of AVAX (the Avalanche token) to GMX.

GMX confirmed the price manipulation exploit in a Sunday post on Twitter, but stated that the AVAX/USD market would remain open despite imposing a $2 million cap on long positions and a $1 million cap on short positions.

Head of derivatives at Genesis Trading Joshua Lim was one of the first to analyze the exploit, stating that the exploiter “successfully extracted profits from GMX’s AVAX/USD market by opening large positions at 0 slippage” before transferring the AVAX/USD to centralized exchanges at a slightly higher price.

Lim said this exploit method was repeated five times, with the first cycle taking effect at 1:15 am UTC on Sunday. Each cycle transferred more than 200,000 AVAX, roughly $4-5 million per cycle, with the exploiter extracting about $565,000 in profit after paying spread to market makers on other exchanges.

Lim however noted that this wasn’t an “exploit” in that it was “GMX working as designed.”

Technical analyst Duo Nine added that the exploiter was able to take advantage of several large trades against GLP holders because the fixed prices supplied by the Chainlink-run oracles come with no price impact, which is what made the price manipulation exploit possible:

“If traders make profit, the liquidity providers lose. If traders exploit this vulnerability, the GLP holders may lose all their money!”

While GMX immediately capped short and long open interest for AVAX/USD to protect the DEX from further manipulation, Lim said that GMX may need to scrap its “zero price impact” feature despite it successfully onboarding many users to date:

“The real issue is GMX doesn’t reflect the true cost of liquidity like other venues do, it offers unlimited liquidity at a mid-market oracle price.”

The recent exploit comes only weeks after the founder of layer-2 DEX ZigZag, Taureau, said in a Sept. 2 video call that he doubted GMX’s exchange model would be sustainable over the long term, adding that a trader with the right strategy could wipe out GLP tokenholders:

Community Reaction

The news brought about mixed reactions from the GMX community. One Twitter user highlighted the fact that no smart contract was exploited, while another Twitter user asked GMX whether any compensation would be paid out to affected GLP holders.

Related: What are decentralized exchanges, and how do DEXs work?

On GMX, liquidity providers supply Bitcoin (BTC), Ether (ETH), AVAX and stablecoins in exchange for the GLP token. The protocol was launched in late 2021 on Ethereum layer-2 scaling network Arbitrum.

The GMX token (GMX) is currently priced at $39.07, down 16.7% over the last 24 hours, according to CoinGecko.