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Author: Sangmi Cha, Sidhartha Shukla, Bloomberg; Compiled by: Deng Tong, Bitchain Vision
Do Kwon from South Korea dominated one of the biggest bubble bursts ever in the turbulent cryptocurrency industry.His Terraform Labs Pte created the TerraUSD stablecoin, which aims to maintain a constant $1 value through complex algorithmic combinations and trader incentives involving sister token Luna.Their total value soared over $60 billion until confidence in the system disappeared in May 2022, prompting investors to flee and deprive the tokens of their value.South Korea issued an arrest warrant for allegations including violations of capital market laws due to the unknown whereabouts of Kwon.He denied any misconduct or “attack”.But he became the subject of an Interpol Red Wanted warrant and was arrested in Montenegro in March 2023, triggering extradition requests from South Korea and the United States.A year later, a Montenegro court ruled that power should be sent to South Korea, but the country’s Supreme Court suspended the decision on March 22.It can now be extradited to any country only after further consideration by the court.
1. Who isKwon?
According to his LinkedIn profile,32 years oldKwon left Stanford University in 2015 to earn a degree in computer science.As he said, he had worked at Apple and Microsoft before, “falling into the crypto rabbit hole.”Kwon 于 2018 年与他人共同创立了 Terraform Labs，他是众多将数字账本视为通向金融革命的门户的年轻程序员之一。他在主流金融和监管机构之外创建稳定的数字货币的项目吸引了大批追随者，但也有批评者称这是注定失败的庞氏骗局。Sometimes, Kwon is arrogant and aggressive, attacking opponents online, telling one critic that the Luna community is not “poor as your broken egg.”When his project failed, he said he was “heartbroken by the pain my invention has brought to you all”.
2. What’s wrong with TerraUSD stablecoin?
TerraUSD is an algorithmic stablecoin whose sister token, Luna, has been expanding its value amid the pandemic-era cryptocurrency boom.TerraUSD is not backed by dollars or traditional assets, but should be worth $1 because it can be converted into $1 worth of Luna, and as the Terraform Labs network becomes more valuable, Luna’s value will increase as well.TerraUSD became increasingly popular when Kwon launched Anchor Protocol, a protocol that offered a jaw-dropping 20% interest rate for TerraUSD deposits.But when investor confidence disappears due to the sell-off of virtual currencies, the entire building collapses.On May 7, 2022, when the price of TerraUSD fell to 99 cents, its peg began to collapse.Terraform Labs significantly increased Luna’s supply in search of recovery, causing the latter’s price to fall.(It used to be worth more than $100.)Billions of dollars worth of Bitcoin reserves failed to stop the spiral: TerraUSD and Luna were almost worthless in a few days.South Korean authorities are trying to determine the whereabouts of assets worth millions of dollars.
three,KwonWhy became a fugitive?
The TerraUSD collapse has shaken the global cryptocurrency industry, causing the cryptocurrency market value to shrink by $2 trillion from its peak in November 2021.This has attracted close attention from regulators from the United States to Asia and South Korea’s law enforcement, which has purchased Luna in about 280,000 people.The lawyers of Luna investors filed a complaint with South Korean prosecutors alleging Kwon was involved in fraud and illegal fundraising.On September 14, 2022, prosecutors said an arrest warrant was issued against Kwon and five others, including violation of capital market law.The outside world believes that Kwon is in Singapore, but Singapore said on September 17 that he is no longer in Singapore.检察官 9 月 26 日表示，国际刑警组织已发出红色通缉令，要求全世界警方找到并逮捕权，他的韩国护照也被剥夺。In February 2023, the Securities and Exchange Commission accused Kwon and Terraform Labs of fraud.In March, Kwon and former chief financial officer Han Chang-joon of Terraform were arrested while trying to board a private plane to Dubai at the airport in Montenegro’s capital Podgorica.On the same day, the United States accused Kwon of orchestrating a years-long cryptocurrency fraud case.Han Changjun was extraditioned to South Korea in February 2024.
4. Kwon’s defense
Kwon’s Terraform Labs rejected South Korea’s allegations, saying the case against him had become “highly politicized”.A spokesman for the company said the prosecutor’s conduct was unfair and that there was no reasonable basis for allegations that Kwon violated the national Capital Markets Act because Luna did not qualify for securities under that standard.Whether Luna is governed by securities laws is a key issue in this case and echoes a broader question raised by global officials regarding the status of digital tokens.Kwon’s representative had previously said the SEC’s lawsuit accusing him and Terraform Labs of securities fraud was groundless.
5. What are the broader impacts on cryptocurrencies?
Billionaire Mike Novogratz’s Galaxy Digital business supports Terraform Labs, calling TerraUSD a “great idea for failure” and a teaching moment about cryptocurrency risk management.The impact of the Terra incident includes encouraging officials to set rules for stablecoins to better protect buyers, etc.Jurisdiction such as the EU, Japan, Singapore, Hong Kong and Dubai have stepped up their regulation of the industry in the process of competing for becoming a digital asset hub.The U.S. Congress has been considering several cryptocurrency bills, including legislation to build guardrails for stablecoins.Investors are also more vigilant about decentralized finance (DeFi) – especially beware of trading and lending tokens on distributed ledgers.
