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Why Is Luna’s Do Kwon Not in Prison Yet? -Breaking

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Why Is Luna’s Do Kwon Not in Prison Yet?

“What we need to remember always our true North Star of why we started this in the first place, and that is to make sure that our money is the most decentralized and the most useful on the face of this f*****g planet!” That’s what Don Kwon, 30-year old founder of TerraLabs stated confidently on stage in New York back in 2021.

“At the end of this process, what is going to be beautiful is that TerraLabs is going to follow the organic trajectory of any other thing in the environment. We [are] going to come from nothing and go back to nothing,” explained the South Korean founder, aspiring to create a decentralized system that would eventually run itself.

His crypto fame was rising and he had already created one the largest-growing crypto projects. He was worth roughly $15 billion with his interrelated cryptocurrency TerraUSD (UST, and LUNA), which tripled in value over the following months.

Those fateful words were a self-fulfilling prophecy. In May this year, UST/LUNA crashed to almost $0 and investors lost $60 billion. The scale of the disaster certainly matched that of Kwon’s ambitions.

From being seen as a “psychopath” by critics, to a misunderstood “genius” by his almost cult-like online community, Kwon fell from the top, leaving more questions than answers. So, as investors worldwide mourn their losses, should the dynamic founder be held accountable for his project’s massive failure? It is an overwhelming yes.

Tragic Crash, Flight to the Moon

Kwon managed to convince everyone with his vision of a new payment system that would upend the status quo and replace the world’s currencies. Terra became a hit in the crypto sphere, inspiring an almost devotional following of Kwon by so-called ‘LUNAtics’. The online community bought into Kwon’s ideas for the future of decentralized finance and the opportunity to become rich.

Numerous people have created memes glorifying Kwon by using moon emojis to sign their names on social networks. Mike Novogratz is the founder of Galaxy Digital crypto asset management firm. He showed his self-dedication by sporting a LUNA-inspired tattoo to his arm. In April, Kwon announced the birth of his daughter, whom he had named Luna, tweeting, “My dearest creation named after my greatest invention.”

Kwon’s ambitious idea was based on having two interrelated digital currencies that were designed to balance each other out. TerraUSD (UST), the stablecoin was meant to be pegged at 1 Stablecoins can be backed with tangible assets such as U.S. Dollars. However, UST is backed by its algorithmic relation with the LUNA token.

LUNA served as a protocol token in order to decrease the volatility of Terra’s stablecoin. In theory, the trick to keeping the stablecoin’s value at $1 laid in one’s ability to exchange one currency for the other at a fixed value.

The things began to crumble on the 7th of May, just after TerraUSD’s massive withdrawal by users all over the spectrum. The ecosystem’s interconnectedness caused UST to plummet far below the dollar peg, and entered a spiral of death with LUNA. Kwon swiftly deployed much of the crypto’s reserves in order to try to bring the price of UST back up to a dollar, but the efforts proved to be made in vain. Terra was practically worthless within a few days.

Despite some early resistance from the community, Kwon relaunched the collapsed network by hardforking to a new chain called ‘Terra 2.0’, and a new token was launched with the promise of helping to retrieve lost funds.

Experts’ Warnings and Kwon’s Arrogance

While the community of ‘LUNAtics’ called the crash an “attack,” blaming Wall Street giants for conspiring to destroy them, Terra’s downfall seems to have been inevitable. Analysts warned it was in the code.

Experts tried to warn Kwon, but he ignored them. If too many people pull their cash out at the same time, the balance between both tokens could collapse. Kwon was enthralled by his vision of Satoshi Nakamoto as the next Satoshi Nakamoto.

In 2018, Cyrus Younessi, an analyst for crypto investment firm Scalar Capital, foreseen that this type of project could enter a “death spiral”, a situation in which a crash in the price of Luna would bring the stablecoin down with it. In an interview, he asserted: “This is crazy. This obviously doesn’t work.”

Galois Capital’s hedge fund manager Kevin Zhou predicted repeatedly that the currencies would crash. Many even called the project a Ponzi scheme. Charles Cascarilla was a founding member of Paxos, a rival stablecoin. He expressed concerns about the technology that underpins LUNA. Kwon responded to Cascarilla patronizingly, tweeting, “Wtf is Paxos.”

Kwon proudly promoted his UST stablecoin’s safety on social media, despite the questionable technical foundations. “Those of you waiting for the earth to become unstable – I’m afraid you will be waiting until the age of men expires,” he tweeted with hubris.

Indeed, just a week before UST lost its peg to the U.S. dollar, Kwon had been bragging, and ironically stated in an interview that “there’s also entertainment in watching companies die.”

Even days before the ultimate crash of Terra, Kwon looked down on doubters, calling them “poor”: “Anon, you could listen to C.T. influensooors about UST depegging for the 69th time, Or you could remember they’re all now poor, and go for a run instead.”

Are you looking for irresponsible humour or a deliberate scam?

Although the crash occurred a month ago now, its effects are still felt throughout the industry. Kwon is unable to fall asleep at night due to scandal and scandal. Since then, more than 2,000 investors filed a lawsuit against Kwon. The U.S. Securities and Exchange Commission opened an investigation into possible money laundering. Kwon was just days away from being accused by an alleged Terra insider for manipulating Terra votes.

Many have suggested that Kwon may have known Terra would collapse in the months ahead and pulled large sums of money out of corporate coffers. Kwon denies these accusations and claims that he lost all his possessions in the crash.

Although the collapse of traders was devastating, interestingly investment companies cashed out quickly for some reason. According to some sources, Kwon could have used his non-profit organization, the LUNA Foundation Guard to save whales. They moved huge sums of money onto Binance or Gemini, and used that money to purchase UST for $1. This was at a time where UST was approximately $0.60 per unit on secondary markets. South Korean authorities accuse TerraLabs also of tax evasion, adding to their long list of worries and accusations against Kwon.

The investigation is still in progress so there’s no definitive conclusion as to whether Kwon is innocent or guilty. Kwon was sentenced by the crypto community regardless of what the law enforcement decides. The failure of TerraLabs was so immense that it shook the entire crypto asset class, erasing half a trillion dollars from the sector’s market cap, and leading to a break down of trust throughout the space.

Terra’s stablecoin led to the uncomfortable realization that not everything named “stable” is truly stable, and Kwon is primarily to blame for hyping up the promise that UST would always be safely pegged to $1. Stablecoins work in the same way as central bank deposits so it is important to be as careful with the language around them.

Kwon and TerraLabs deliberately hidden the dangers associated with their algorithm-based stablecoin while promoting its steady yields. USDT was advertised on the same level as the dollar-backed USDC—a primarily false claim. It was a deliberate fraud, but it is hard to believe that it would be able to take any responsibility.

Bernie Madoff, a legendary financier, was sentenced 150 years to prison. Under the current legal system it seems that being a bad CEO isn’t a crime. There are few checks and balances to prevent multi-billion-dollar scams or mistakes in this crypto-regulated world. Even though Kwon has gone low profile since the crash, he still walks a free man, and may even be trying to rebuild his crypto empire: this should not be the case⁠—Kwon needs to take responsibility for his house of cards.

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