Terra plunges as Do Kwon is arrested in South Korea
Important takeaways
- A court in Seoul has issued an arrest warrant for Terra co-founder Do Kwon.
- In response, Terra blockchain’s original LUNA token has crashed over 33%. LUNC is also down over 20%.
- Kwon has previously stated that he intends to cooperate with police.
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According to the prosecution, all six wanted individuals from Terraform Labs are currently residing in Singapore.
The manhunt begins for Do Kwon
The law finally catches up with Do Kwon.
A Wednesday report by the South Korean news agency Chosun Ilbo hair revealed that a court in Seoul had issued arrest warrants for the Terra founder and five other people. The death warrants alleged that Kwon and his accomplices violated Korean capital market law, according to a text message from prosecutors.
In response to the news, Terra 2.0, the blockchain that Kwon’s company Terraform Labs launched after the collapse of the original Terra blockchain, has been hit hard. The network’s native LUNA token has fallen more than 33% since the news broke.
Strangely enough, LUNA experienced a significant price jump on September 9. The token surged over 300% in a day to hit a local high of $7.65 after earlier trading in a tight range between $1.50 and $2.50 for several weeks. After today’s dump, LUNA is currently trading at around $2.79, down 63% from its recent peak.
Kwon’s arrest warrant comes after the widely documented collapse of the Terra blockchain in May. After briefly becoming the fifth largest cryptocurrency by market capitalization, the blockchain ecosystem imploded as investors lost confidence in the dollar peg to the network’s UST stablecoin. Since UST was not backed by real dollars and instead held its value through an algorithmic relationship with LUNA, the loss of trust resulted in a death spiral that sent the price of LUNA and UST down to fractions of a penny, wiping out more than $40 billion of value. LUNA was renamed LUNC (Luna Classic) when Terra 2.0 launched and has received a 21.8% hit on today’s news, trading at approximately $0.00028 at press time.
Terra’s collapse triggered investigations by the US Securities and Exchange Commission, Korean regulators, as well as several class-action lawsuits. US Treasury Secretary Janet Yellen also referenced the incident in a recent speech calling for increased regulation of stablecoins.
In July, South Korean officials raided at least seven cryptocurrency exchanges in connection with investigations into Terraform Labs. Several lawsuits also allege that Kwon and his company defrauded investors and accused the firm of running a Ponzi scheme.
In an interview with crypto media startup Coin last month, Kwon said he intends to cooperate with law enforcement when the time comes. However, according to prosecutors in Seoul, Kwon and his associates are currently residing in Singapore.
Disclosure: At the time of writing this piece, the author owned ETH, BTC and several other cryptocurrencies.
