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After the collapse of Luna and UST, the co-founders of Terraform, Do Kwon is now facing legal pressure from affected Korean investors. They have filed criminal and civil charges, in addition to an order to seize Kwon’s assets.
According to Korean news outlet Munhwa, investors UST and LUNA filed in court to confiscate Kwon’s property this week, while also charging him with a fraud case. They will be represented by law firm RKB & Partners, where 6 attorneys have reviewed complaints against the CEO.
“There are related investors within the law firm, and we plan to file a complaint against CEO Kwon at the Seoul Metropolitan Police Agency’s Financial Investigation Unit,” said Kim Hyeon-kwon, partner at LKB & Partners . 2022).
Kwon became the target of the crypto industry’s ire after the stablecoin UST lost its stake against the dollar. Its stabilization mechanism also caused Terra’s governance token, LUNA, to hyperinflate, reducing its value to nearly zero.
Many big investors in protocol such as one of the British Youtuber, KSI witnessed LUNA’s multimillion dollar position collapse.
As a result, Kwon could be summoned to appear before the South Korean government to testify about the collapse of any cryptocurrency . National politician Yun Chang-Hyun has requested that Kwon and other local crypto exchange executives explain their actions while the de-peg is underway.
That’s not all. Next week, a new Korean group called “Victims of Luna, UST coins” will file a lawsuit against co-founders Do Kwon and Shin Hyun-Seong for fraud and illegal fundraising. More than 1500 people are members of the group.
Even so, no lawsuit from “Victims of Luna, UST coins” has reached the courts yet, but it will likely be soon.
South Korea Launches Emergency Investigation into Falls of LUNA and UST
Previously, South Korea’s top financial regulator had launched an emergency investigation into the collapse of cryptocurrency LUNA and stablecoin UST. Authorities have asked domestic cryptocurrency exchanges to provide information relating to transactions and investors of the two coins.
Last week, UST lost its peg against the US dollar, sending UST and terra (LUNA) prices in free fall. The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), have asked local cryptocurrency exchange operators to share information relating to UST and LUNA, sources told the news outlet.
An official from a local crypto exchange operator said:
“Last week, financial authorities requested data on the number of transactions and investors, and measured relevant measures on exchanges,” the official said.
“I think they did it to put in place measures to minimize the damage to investors in the future,” he continued.
Information requested by the authorities includes trading volume, closing price and relevant number of investors. The regulator also asked the exchange operators to provide their countermeasures against the recent crypto market crash and analysis of the causes of the collapse.
UST and LUNA were discovered by Kwon Do-hyung (aka Do Kwon), a South Korean citizen. His company, Terraform Labs, was founded in Singapore. Since the collapse of the two cryptocurrencies, Kwon has made several plans to revive the coin but nothing has worked out so far.
Kwon’s wife reportedly sought police protection after an unidentified man trespassed into their apartment building in South Korea. According to media reports, the man was later identified as the investor who lost around USD 2 million in the LUNA collapse.
Terra Do Kwon Creator Announces Plan to Solve Luna Coin Problem
Previously, the co-founder of the Terra blockchain, Do Kwon, announced a new plan to restore the ecosystem after the crash of two Terra network tokens namely Luna and Terra USD. The plan is to create a new blockchain which is a hard fork of the previous blockchain.
A hard fork is a change that is not compatible with the old version. This can happen if there is a contradictory change from the old protocol. Reported from Cointelegraph, Tuesday (17/5/2022), as Kwon said, Monday 16 May 2022, Terraform Labs will submit a new governance proposal on 18 May to fork the Terra Luna blockchain called Terra.
Later, the new chain will not be linked to the stablecoin Terra USD (UST). Meanwhile, the old Terra blockchain will continue to exist with UST and will be called Terra Classic (LUNC). Under Kwon’s plan, if passed, the new LUNA blockchain will go live on May 27.
Under this proposal, new LUNA tokens will be delivered to LUNC holders, UST holders, and key developers of the Terra Classic blockchain.
In addition, the Terraform Labs wallet with the address terra1dp0taj85ruc299rkdvzp4z5p fg6z6swaed74e6 will be removed from the whitelist for airdrops, thus making Terra a completely community-owned chain.
The proposed LUNC supply is capped at 1 billion, with 25 percent going to community pools, 5 percent to key developers, and 70 percent to LUNC and UST holders across various event snapshots in May, depending on vesting conditions.
Get Criticism
However, it turns out that the plan has been criticized by Binance CEO Changpeng Zhao. Zhao said he doesn’t think Terra’s plan to fork the blockchain will work as it won’t provide any value.
“This won’t work. Forking doesn’t give any value to the new fork. It’s just wishful thinking,” Zhao said, quoted from Theblockcrypto, Tuesday (17/5/2022).
Zhao’s tweet came after Kwon proposed a revival plan for Terra after it collapsed last week. Kwon proposes forking the Terra blockchain creating a new chain and distributing 1 billion tokens to stakeholders.
However, according to Zhao, “minting coins (minting money) does not create value.” It just “unfreezes existing coin holders.” Zhao also questions where Luna Foundation Guard’s Bitcoin reserves are.
“Shouldn’t that BTC ALL be used to buy back UST first?” Zhao asked.
Overall, Zhao is “very disappointed” with how the Terra team handled the collapse of the stablecoin UST and its associated token Luna (LUNA).
Binance Labs is known to be an early backer of Terraform Labs, which led an initial USD 32 million round in 2018. Terraform’s other well-known investors include Coinbase Ventures, Polychain Capital, Pantera Capital, and Hashed.