Terra-Luna founder Do Kwon transferred $7 million to the law firm just before the coin’s collapse that triggered the crypto meltdown
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Terraform Labs founder Do Kwon transferred $7 million (KRW 9 billion) to a law firm in South Korea just before the company’s high-yielding stablecoin Terra and its companion token Luna collapsed last year, triggering a broader crypto market rout.
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The transaction, which was first reported by South Korean broadcaster KBS News, was confirmed by South Korean prosecutors who told Bloomberg that the report “is not false.”
Kwon allegedly transferred the money to Seoul-based law firm Kim & Chang “just before” the collapse of Terra and Luna last May, the report said, without specifying an exact timeline.
Forbes has contacted Kim & Chang for comment, but the firm told Bloomberg it is unable to provide details and that it has “legitimately received the fee” for its legal advisory services.
The KBS report adds that prosecutors in both South Korea and Singapore – both countries where Kwon is facing charges of violating securities laws – are tracing the source of the funding.
Kwon could face further legal jeopardy if the money was acquired by liquidating the company’s own tokens just before it collapsed.
Both reports note that the proximity of the payment to Terra and Luna’s collapse may indicate that Kwon anticipated this possibility and was preparing for a legal battle.
Key background
Kwon, who had reportedly been on the run for several months, was arrested in Montenegro in March when he tried to fly to Dubai using forged travel documents. Immediately following his arrest, US federal prosecutors charged the disgraced crypto mogul with multiple fraud charges, including conspiracy to commit commodity fraud, securities fraud, wire fraud, conspiracy to defraud investors and engaging in market manipulation. In his native Korea, Kwon is on trial for violating the Capital Markets Act, and he also faces fraud charges in Singapore. Kwon is a co-founder of Terraform Labs, which created and operates the Terra blockchain protocol, the high-performance algorithmic stablecoin TerraUSD, and its companion token, Luna. As an algorithmic token, Terra’s value was solely backed by the value of its free-floating companion coin, Luna. When Terra lost its $1 peg last May, it triggered a rapid downward spiral that resulted in $40 billion being wiped from the cryptocurrency market and rendered both Terra and Luna worthless. The collapse of Terra-Luna, along with the insolvency of Singapore-based crypto hedge fund Three Arrows Capital (3AC) and the bankruptcy of crypto lender Celsius, led to a broader collapse in the crypto market.
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South Korea signals Kwon kept law firm before Terra collapse brought crypto (Bloomberg)
Terra-Luna Coins Founder Do Kwon Charged with Fraud by US Prosecutors (Forbes)
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