Terraform Labs CEO Do Kwon has denied he’s “on the run” from South Korean authorities, despite prosecutors in Seoul claiming the exact opposite. The latter issued an Interpol red notice against Kwon last week concerning the failed DeFi project, claiming he had fled to Singapore. Meanwhile, several high-profile digital asset exchanges continue to list LUNA-related assets despite the apparent risks.
LUNA is an asset on the Terra blockchain. The Terra chain was also home to terraUSD (UST), an algorithmic “stablecoin” with a 1:1 USD peg based on LUNA trading. UST became uncoupled in May 2022 as LUNA’s price plummeted after a spate of panic-selling and Terraform Labs’ attempts to prop up value with large purchases of other digital assets. The U.S.$40 billion collapse saw several traders and related projects go bust, and South Korean prosecutors began investigating what happened.
Prosecutors from Seoul’s Southern District said they were doing their best to locate and arrest Kwon, adding that the wayward digital asset entrepreneur was “clearly on the run” and that other key finance staff from Terraform Labs left for Singapore at the same time.
For his part, Kwon denies he’s evading capture and continues to communicate with followers, even making light of the situation on Twitter:
Tbh havent gone running in a while, need to cut some calories https://t.co/SP9VtS5ob2
— Do Kwon 🌕 (@stablekwon) September 17, 2022
“We are in the process of defending ourselves in multiple jurisdictions,” he said. “We have held ourselves to an extremely high bar of integrity, and look forward to clarifying the truth over the next few months.”
For the record, Terra/Luna tokens are still trading on exchanges like Binance and Kraken—both the original “Terra Classic” asset (LUNC), its replacement LUNA 2.0 (LUNA2 or just LUNA), and USTC or UST Classic. LUNC (originally LUNA) topped U.S.$116 in price back in April 2022 before crashing to near-zero in May, where it has remained ever since. The LUNA 2.0 asset trades between $1-2, with occasional spikes. With confidence in Terra/Luna all but evaporated, these assets trade as mere novelties or “meme coins” for gamblers or holders hoping they can win back some of their losses.
It’s a good example of how exchanges don’t care about the utility or viability of their list assets. Both Kraken and Binance “decided” to climb on a moral high horseback in 2019 when they delisted BSV, citing concerns over the public actions Bitcoin creator Dr. Craig S. Wright. Apparently, such concerns apply uniquely to BSV and don’t extend to other tokens, even when their blockchains are in ruins, and their creators are reportedly on the run from the law.
There are about 7 trillion Luna Classic (LUNC) tokens on the market, though the Terra project aims to “burn” them as it collects a 1.2% transaction tax to make up some of the project’s overall losses.
Even before its collapse, Terraform Labs was the subject of allegations that its DeFi project was a “Ponzi scheme” or had properties that would subject it to securities laws. South Korean regulators had raised previous concerns about the project, and the U.S. Securities and Exchange Commission (SEC) in September 2021, issued subpoenas for Kwon in relation to Terra’s Mirror “synthetic stock” protocol.
Kwon and other Terraform Labs employees were also reportedly involved in previous failed algorithmic stablecoin projects called Basis and Basis Cash. Algorithmic stablecoins attempt to use trading mechanisms to maintain a steady value rather than keeping reserves of more reliable assets as backing. Even the most traditional of stablecoins, Tether (USDT), has failed to prove it keeps anything near its market cap in actual U.S. dollars, making it vulnerable to a sudden bank run.
Yet Tether, along with many other unproven and decidedly shaky digital assets like Terra’s stable of tokens, continues to be a popular asset on most of the biggest exchanges. Companies like Binance and Kraken reveal the hypocrisy in their actions by continuing to list these assets while feigning concern for the industry by omitting BSV from their platforms.
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