USTC

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.

Terra developers propose revised 95M LUNA ecosystem funding program

It is an update to the original 100 million ecosystem funding proposal, which Terra developers say did not fit the community’s needs.

On Monday, developers of the Terra ecosystem — consisting of Luna Classic (LUNC), which was formerly known as LUNA, TerraUSD Classic (USTC) and Luna 2.0 (LUNA) — proposed a revised expansion program for allocating 95 million LUNA ($248 million). As told by Terra, the new proposal is designed to incentivize development in the Terra ecosystem and fix issues in the original proposal.

In the original plan, around 10% of LUNA’s total supply, or 100 million LUNA, would be allocated to the ecosystem, with 80% of this amount going to developer mining rewards. However, Terra staff explaine that there are only a handful of projects with total value locked on the protocol, and such lack of competition would not result in the proper distribution of mining revenue.

Under the new proposal, developer mining rewards would decrease from approximately 80 million LUNA to 20 million LUNA. On the other hand, 50 million LUNA would be reallocated as liquidity mining rewards to incentivize building decentralized exchanges on the Terra ecosystem. Another 20 million LUNA would be given as developer grants, with a maximum recipient amount of 125,000 LUNA per project per year. Finally, 5 million LUNA will be given to users to incentivize traction.

A seven-member committee consisting of TerraForm Labs (TFL) employees, community leaders and external experts will oversee the allocation of funds. The appointment period will be one year, with non-TFL employees in the group receiving a monthly compensation of 1,000 LUNA. Although the committee members will vote to decide on funding proposals, the committee, itself, will have discretionary authority over the allocation of funds.

Meanwhile, the treasury will be managed by a separate group consisting of two validators, two community members and three members of TFL. A few months earlier, the Terra Luna ecosystem suffered a devastating $40 billion collapse, with the algorithmic LUNC-USTC coin pair spiraling out of control as part of a week of intense sell-offs. Since then, the ecosystem has partially stabilized but remains well below of pre-crash market valuation. According to DefiLlama, TVL on Luna currently stands at $51 million. 

CoinShares reports $21.7M loss tied to Terra implosion

The firm’s book-making took a huge hit after being exposed to the TerraUSD collapse.

On Tuesday, European cryptocurrency investment firm CoinShares posted its interim Q2 2022 results. Compared to the prior year’s quarter, the firm’s revenue declined from 19.6 million pounds ($23.89 million) to 14.2 million pounds ($17.31 million). At the same time, its net income fell from 26.6 million pounds ($32.42 million) in Q1 2021 to 0.1 million pounds ($0.12 million). 

CoinShares explained that the losses were largely tied to its exposure to the Terra (LUNA) — now called Terra Classic (LUNC) — ecosystem, which collapsed in May of this year:

“While our Asset Management business continued to generate solid profit, the Capital Markets business experienced a one-off loss of £17.7 million following the de-pegging of Terra Luna. The financial impact of this episode, despite being relatively small when compared to the losses incurred by other players in our industry, had a material impact on our quarter.”

Coinshare Capital Markets typically does not take directional positions and was not directly exposed to the Terra Luna collapse. However, at the time of the incident, the firm was carrying a book linked to the TerraUSD stablecoin, resulting in an exceptional loss.

CoinShares CEO Jean-Marie Mognetti has nevertheless expressed optimism about the firm’s future operations, saying:

“In light of the market turmoil, we have reviewed our risk profile and moved into a more defensive mode. CoinShares has sufficient resources to navigate the markets during this volatile time thanks to an effective strategy, a robust balance sheet, and a seasoned, world-class team.”

Related: What is Terra (LUNA)? A beginner’s guide

For its next steps, CoinShares plans to uplist into the Nasdaq Stockholm Main Market after gaining an Alternative Investment Fund Manager license. During the second quarter, CoinShares launched five new physical products, including CoinShares Physical FTX Token, CoinShares Physical Chainlink, CoinShares Physical Uniswap, CoinShares Physical Staked Polygon and CoinShares Physical Staked Cosmos. The firm possessed 220.8 million pounds ($269.15 million) in net assets at the end of Q2.

The price of TerraUSD in the past year. Source: CoinGecko

Double bubble? Terra’s defunct ‘unstablecoin’ suddenly climbs 800% in one week

The USTC price rally does not mean it would reclaim its lost U.S. dollar peg in the future.

Terra’s $40-billion experiment to create a functional “algorithmic stablecoin” project has failed drastically following its collapse in May.

Nonetheless, its native stablecoin TerraClassicUSD (USTC), earlier called TerraUSD (UST), has been thriving in the past week.

Dead stablecoin walking

To recap, UST lost its U.S. dollar peg in May following mass withdrawals from Anchor Protocol, a lending and borrowing platform offering up to 20% yield to clients on their UST deposits. As of June 15, the token was almost worthless, trading at $0.005 at the Kraken crypto exchange.

But USTC started recovering afterward, insomuch that its value per token almost reached $0.10 on June 29. Simultaneously, its capitalization surged from $65 million to $767 million in the same period, according to data from CoinMarketCap.

USTC market cap. Source: CoinMarketCap

That is despite USTC operating as an abandoned token after Terra launched a new blockchain with a new native asset LUNA 2.0, following a “hard fork” in May.

Interestingly, LUNA 2.0’s older version, called LUNA, which now operates under the name “Terra Classic (LUNC), has also witnessed a spike in its market valuation like USTC, surging from around $160 million to $767 million in June.

LUNC market cap. Source: CoinMarketCap

Massive concentrated Terra pump

According to CoinMarketCap, more than 45% of trading volume behind USTC and LUNC’s surprising price boom has originated from KuCoin, a centralized exchange platform reportedly operating from Seychelles.

KuCoin’s lead backer is NEO Global Capital, a Singapore-based venture capital firm also exposed to financial platforms like Babel Finance and CoinFLEX. Both platforms have been facing liquidity troubles due to the ongoing crypto market decline.

“This isn’t a boom, bust and boom again cycle,” warned InvestmentU, a financial analytics group in its June 28 note, saying that LUNC could decline massively because “the tech behind it is dead.”

“Its (LUNC) raison d’etre has been vanquished. And so has its price. While we can appreciate investors’ natural desires for outsized gains, there are better ways to go about it than this.”

Related: Terra’s LUNA2 skyrockets 70% in nine days despite persistent sell-off risks

The outlook appears the same for USTC, which has failed to perform its main function, i.e., providing clients a digital, stable version of the U.S. dollar.

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