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Is Terra’s Do Kwon Evading Investigation? Prosecutors Say So

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Terra’s downfall is still haunting Do Kwon. The South Korean authorities are stating that Do Kwon is trying to evade a possible investigation.

As UST lost its $1 peg on May 10, Terra’s currency and its algorithmic stablecoin Terra USD experienced a sharp decline. The mechanism was designed to maintain its peg to the US dollar automatically. The UST lost value as a result of its failure, and a record number of LUNA tokens were generated.

The decline was severe, with LUNA’s value falling by 95% in a couple of days. The fall witnessed millions losing their life savings as billions was wiped out of the crypto market.

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Is Terra’s Do Kwon Evading Investigation? Prosecutors Say So 2

Is Terra’s Do Kwon on the run?

Kwon had relocated from South Korea to Singapore, the basis of his now-defunct Terraform Labs enterprise, although the city-state claims he has left.

Even though Seoul prosecutors are seeking Kwon’s arrest over claims including breaking capital-markets law, his location is unknown, and he insists that he is not on the run.

Since he left for Singapore, there has been “circumstantial proof of escape,” according to the prosecutors’ office, which is why an arrest order was first issued. Regarding whether the office is aware of Kwon’s location or intends to inform Interpol, it declined to comment.

Despite not publicly disclosing his location, Kwon tweeted days back that he doesn’t “have anything to hide” and is cooperating fully with authorities.

However, according to prosecutors quoted by the Yonhap News Agency, Kwon is not participating in investigations and has informed investigators via an attorney that he has no plans to appear up for interrogation. In addition to this, South Korean authorities urged Interpol to issue a “red notice” against Kwon.

Kwon, along with five others, is facing arrest in South Korea in connection with the Terra affair. Officials might revoke his passport, requiring him to return to Seoul within 14 days after receiving the notification of suspension.

After a string of failures, notably Terra, the Three Arrows Capital hedge fund, and cryptocurrency lender Celsius, crypto firms also realize the necessity for much tighter risk management.

The regulators are also strengthening the measures to ensure that an incident similar to that of Terra will never happen again.

Terra founder issued with arrest warrant

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Authorities from all across the world have been looking into Terraform Labs, its founder Do Kwon, and other connected parties. Terra [LUNA] and its native stablecoin UST lost the majority of their value earlier this year. Investors suffered enormous losses as a result of this. The market as a whole got tumultuous as a result of the same having a knock-on effect on the larger ecosystem.

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Do Kwon, Founder of Terra

The most recent development indicates that South Korean officials aim to detain Terra’s creator Do Known by issuing a warrant for his arrest. According to a recent Bloomberg report:

“The court in Seoul issued a warrant for Do Kwon and five others, according to a text message from the prosecutor’s office.”

Terra in troubled waters

It is important to remember that recent local media reports claimed that South Korean authorities were looking at whether the Terra ecosystems had securities-like traits. Notably, the Seoul Southern District Prosecutors’ Office Terra investigative team was evaluating Luna’s securities capabilities using precedents from other countries.

Authorities reportedly called in virtual asset specialists to hear different points of view. Additionally, they cited the Financial Supervisory Service and other financial authorities as references.

They stated in their report from yesterday that Luna and Terra could face charges of breaking the Capital Market Act for unfair trade, such as market price manipulation, if the prosecution determines that they have securities properties. According to Bloomberg, who confirmed the trigger for the warrant’s issue,

“A local newspaper earlier reported that the warrant was related to a violation of capital market rules.“

According to  Kim Jeong-Cheol, an advocate from Woori Law Firm,

“Currently, virtual assets are not recognized as securities, so the Capital Market Act does not apply. In a situation where the discussion has progressed considerably, there is a high possibility that the Luna-Tera case will become Korea’s ‘leading case’ no matter what charges are indicted.”

In addition, Kim Dong-hwan, Director of blockchain consulting business Blitz Labs, stated,

“In 2018, the investigative authorities only investigated Coinone’s margin trading allegations, but since then, no one has done anything. Therefore, if the public authorities look into it, it will inevitably have a debilitating effect.”

It appeared up until this point that Terra and its CEO were being cautiously viewed by banking authorities. The issuing of the most recent arrest warrant, however, suggests a change in position.

Terra: The period of resurrection with LUNA’s surge

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Without a question, Terra was at the epicentre of the 2022 crypto market collapse. The project was one of the most prosperous before to the catastrophe, reaching a record high of $119.18 in April. But the soaring climb paved the ground for a legendary fall. The ensuing death spiral sent investors and users into a frenzy. Many people’s lives were completely destroyed, losing all they had saved up for. Since then, the team has created a new Terra Luna token (LUNA) and renamed the existing one Terra Luna Classic (LUNC).

After dramatic collapse earlier this year, the Terra blockchain’s cryptocurrency LUNA was regenerated. On Friday, the price of LUNA tripled, trading close to its all-time high achieved in early June when the token was issued.

According to data from cryptocurrency price tracker CoinGecko, the token’s price surged from less than $2 to roughly $7. At the time of publication, LUNA was trading at about $6, up more than 212% over the previous 24 hours on significantly greater trading activity.

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The native coin of the second iteration of the Terra blockchain, which was revived following the token’s collapse in May, which resulted in the loss of $60 billion in value, is called LUNA. Investigations of fraud against Terraform Labs, the company that developed the blockchain, and its founder Do Kwon followed the implosion. The Luna Classic (LUNC) currency and its stablecoin USTC are hosted on the old blockchain, now known as its Classic version.

Terra’s LUNC surprising surge

Risky investments like cryptocurrencies seem to be broadly rising on Friday in a relief rally as several economic indicators point to a slowing global economy and traders consider the possibility that the Federal Reserve may scale back rate hikes earlier than anticipated or even cut interest rates next year.

Traders became enthusiastic about a new burn program that would reduce the token’s inflated supply, which has caused LUNC to rise as well. Since then, the surge has slightly stagnated, as the coin has dropped 17% in the last day.

Crypto market observers are perplexed by LUNA’s erratic price movement because there hasn’t been any network-specific news or development that would spark excitement among retail traders.

Data from the social asset analytics platform for digital assets LunarCrush indicates a recent surge in social media mentions and engagements is indicative of a retail speculative frenzy.

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The new blockchain for the currency has so far had trouble drawing investors into its ecosystem. According to DeFi data tracker DeFiLlama, the network’s total value locked (TVL), a key metric in decentralised finance (DeFi) that gauges how much value a protocol can amass from investors, stood at a pitiful $51 million at press time. In contrast, the “old” Terra Classic blockchain’s TVL reached more than $20 billion in May before its collapse.

Terra’s LUNC soars high even through potential tax change

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Without a question, Terra was at the epicentre of the 2022 crypto market collapse. The project was one of the most prosperous before to the catastrophe, reaching a record high of $119.18 in April. But the soaring climb paved the ground for a legendary fall. The ensuing death spiral sent investors and users into a frenzy. Many people’s lives were completely destroyed, losing all they had saved up for.

Since then, the Terra team has created a new Terra Luna token (LUNA) and renamed the existing one Terra Luna Classic (LUNC).

Terra Luna Classic
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In the past few weeks, LUNC has experienced significant growth. The token has gained by 11.3% over the last 24 hours, according to CoinGecko. Additionally, LUNC has increased by 184.6% over the previous two weeks and by 100.2% over the past seven days.

The latest rally in Terra Classic was probably influenced by the v22 upgrade. The much-anticipated return of staking choices to the project has resulted from the improvement. Staking awards state that stakers can obtain payouts of up to 37.8%. The increased interest in LUNC may be due to its high yield.

However, the network is also undergoing some significant developments.

Tax parameter change on Terra research

There is a fresh suggestion for altering the tax parameter on Terra research. The idea was put forth by Edward Kim. The idea states that fees for on-chain actions, like as transferring money between wallets and dealing with smart contracts, will be assessed and burnt. With this parameter adjustment, taxes on off-chain activity cannot be enforced (like trading on CEXs).

Kim has also listed some benefits and drawbacks of the modified tax parameters. He claims that the tax would serve as evidence of on-chain, community-driven governance. Additionally, it would exert deflationary pressure on UST and LUNC alike. Kim also identifies a possible short-term stimulus for luring in fresh retail investors. Finally, CEXs won’t take a burn-off chain into account until it has been implemented.

Kim acknowledges that taxes have a negative impact on long-term economic activity and chain utility. Additionally, support for current dApps that don’t take taxes into account will end. Furthermore, there is no assurance that the chain will be burned off by the CEXs. Additionally, the tax may force any residual liquidity to CEXs without taxes, off-chain.

The idea is available for debate and will be presented after the negotiations are finished.

Terra Founders Reportedly Ordered to ‘Notify Upon Entry’ and ‘Departure Ban’

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Do Kwon and Daniel Shin, executives of Terra Labs, have received “notification upon arrival” and “exit restriction” notifications from South Korea’s crime investigation team. The prosecution’s request for more investigation into fraud accusations against TerraForm Labs and its executives is approved by the South Korean Ministry of Justice.

Terra’s new restrictions were published by a local media

According to local news outlets on July 27, the South Korean Ministry of Justice granted permission for the Joint Financial and Securities Crime Investigation Team of the Seoul Southern District Prosecutors to issue a “notice upon arrival” on Terra’s Do Kwon.

A “departure restriction” has also been placed on TerraForm Labs’ current and past leaders, including co-founder Daniel Shin and former Vice President Kim Mo.

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Terra Founders Reportedly Ordered to ‘Notify Upon Entry’ and ‘Departure Ban’ 8

The notifications will assist the fraud investigation team in further investigating Do Kwon after his return from Singapore on suspicions of fraud and money laundering. In addition, several executives will be examined in connection with the (UST) and (LUNA) collapses.

Do Kwon is also charged with continuing to promote (LUNA) coins without disclosing the investment dangers. Additionally, he must appear in court for hearings related to litigation Terra investors have brought against him.

Leading legal firms Scott+Scott Attorneys at Law LLP, The Rosen Law Firm, and Bragar Eagel & Squire has brought three class action lawsuits against TerraForm Labs, Do Kwon, and related parties in the United States.

“FatMan,” a Terra insider, yesterday stated through a tweet that he will be joining lead plaintiff Nick Patterson in the Scott+Scott class action case as a plaintiff. Another class action lawsuit for fraud against hundreds of investors is also being prepared against Do Kwon.

Since losing favor, the team partitioned its network and gave the new blockchain the name “LUNA.” The previous blockchain is currently known as LUNA Classic (LUNC).

LUNA’s price was $1.72 at the time of publication, up 2.4 percent over the previous day. LUNC, on the other hand, was up 4.3 percent in the previous day’s trade at $0.0000948.

Terra Is Facing Another Class Action Lawsuit

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A new class action lawsuit has been brought on TerraForm Labs, its founder Do Kwon, its director of research Nicholas Platias, and other companies.

The class action complaint has been filed by Bragar Eagel & Squire PC accusing the defendants of breaking the California Common Law, the Exchange Act, the Securities Act, and the Racketeer Influenced and Corrupt Organizations Act (RICO).

Terra faces three class action lawsuits

In a news statement on July 25, Bragar Eagel & Squire PC disclosed that it has filed a class action lawsuit against TerraForm Labs, its founder Do Kwon, and Nicholas Platias.

In addition, affiliates like GSR/GSR Markets, Three Arrows Capital, Republic Capital, Republic Maximal, Tribe Capital, DFinance Capital, and DFinance Technologies (3AC).

All investors, including people and businesses, who bought or obtained LUNA tokens between May 20, 2021, and May 25, 2022, are included in the class action lawsuit.

In the case, Terra Labs and other defendants are charged with breaking Exchange Act rules. Investors claim that the company misled them, causing them to purchase LUNA Tokens at inflated rates. The defendants reportedly carried out a strategy and set of actions to entice investors.

The defendants are charged with approving false claims that were deceptive and of which they knew or ought to have known. The complaint also asserts that by failing to register their token, Terraform Labs and other defendants violated Securities Act restrictions.

The investigating teams from South Korea and the United States had already agreed to exchange information on their investigations into Do Kwon and the LUNA disaster.

In reality, South Korea’s investigative team searched 15 cryptocurrency businesses and exchanges, as well as co-founder of TerraForm Labs Daniel Shin’s residence and offices, last week, stepping up inquiries into claims that Do Kwon and TerraForm Labs committed fraud.

Terra’s USTC and LUNC values have fallen as a result of the new round of investigations; previously, they had been steadily rising as a result of community-led token burning.

Entities That Caused Terra Collapse Were Raided by South Korean Prosecutors

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Following the collapse of Terra, further investigative actions were taken by the South Korean authorities. Seven bitcoin exchanges were among the 15 companies that South Korean authorities investigating Terraform Labs searched and seized.

The offices of Upbit, Bithumb, Coinone, Korbit, and Gopax, as well as other companies connected to the collapse of Terra, were raided by the Joint Financial and Securities Crime Investigation Team of the Seoul Southern District Prosecutors Office, according to a report published on Wednesday by News1 Korea.

Authorities allegedly collected information on TerraUSD (formerly UST) and LUNA transactions, which resulted in losses for almost 200,000 Korean investors after the tokens’ significant price devaluation and subsequent collapse in May.

Few Terra victims appointed local law firms

Some of the victims of Terra’s collapse and UST’s de-pegging apparently hired local law firm L.K.B. & Partners to represent them in a lawsuit against LUNA and its co-founder Do Kwon on the grounds that the business committed fraud.

More than 100 people who allegedly incurred losses totaling more than $8 million filed complaints with the prosecutor’s office.

According to a representative for L.K.B & Partners, “The defendants did not adequately notify about design faults and deficiencies in the algorithm when building and releasing Luna in a conspiracy to attract investors.”

The bankruptcy of Do Kwon’s firm and the events that followed it, despite the company’s headquarters being in South Korea, significantly affected the cryptocurrency sector.

Investors impacted by the UST and LUNA fiasco in the United States hinted at taking legal action against yield generating program Stablegains for allegedly misappropriating $44 million in deposited cash.

Terra Community Makes a Proposal for the Distribution Method for 0.5% Emergency LUNA Allocation

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Cephii1, a Terra community member, proposes on behalf of the Terra community members. The suggestion is for a mechanism of distributing the 0.5 percent emergency LUNA allocation.

According to the user, the suggestion was made on behalf of community members, validators, TFL, and others. The initiative also aims to improve the Ecosystem’s Revival Plan 2.

The rising discussion over how to distribute the 0.5 percent emergency LUNA properly opened the way for the plan to grant a 10% LUNA supply to developers. However, the LUNA team did not specify how the emergency fund would be allocated.

The Terra community lays down the proposal

The user established the criteria for who is qualified to receive the emergency fund after gathering recommendations from community members:

  • Projects in LUNA Classic that achieved product-market fit and TVL.
  • Projects that began on LUNA Classic and achieved product-market fit but have yet to produce verifiable results TVL.
  • Projects in the pre-and post-launch phases that have not yet established product-market fit (pre-PMF)

The plan first focused on smaller initiatives, outlining the minimum amount needed for minor projects as well as the number of projects that should be funded.

According to the poll, the projects would cost $100-300k for six months of runway. In addition, the community chose over 50 projects that would be eligible for it.

The concept called for providing $100,000 to $300,000 in LUNA to eligible pre-PMF teams. The eligibility and allocations would be decided by a council of long-standing Terra community members, including Karma, Panterra0x, Cephii, Seb, and GJ.

In addition, the user proposed that the projects Coinhall, Terrascope, Setten, SCV, Terra One, Random Earth, Knowhere, Leap Wallet, and TFM receive an additional $500k-$1M in LUNA. This is due to the added value of infrastructure and tooling.

To sum up the emergency fund’s total of 5 million LUNA:

  • 2.5 million should be allocated among projects that debuted on Terra Classic and established product-market fit, as well as TVL (PMF and TVL).
  • One million LUNA should be awarded to ventures that debuted on Terra Classic and achieved product-market fit but no demonstrable TVL (PMF but any TVL).
  • 1.5 million LUNA should be spent on pre-and post-launch measures that failed to create product-market fit (pre-PMF).

Terra’s Fall Has Made South Korea Deploy a New Crypto Oversight Committee

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The rise and collapse of the Terra ecosystem had huge ramifications all across the world, but there’s little doubt that South Korea, the origin of its designer, was the most concerned of all.

According to the local news portal NewsPim, the country’s ruling party said Tuesday that it would organize a new Digital Asset Committee in early June, amid reports that Terraform Labs co-founder Do Kwon was facing legal issues in South Korea.

The committee, according to the article, will act as a watchdog over the crypto business and be in charge of policy development and oversight — at least until the next Framework Act for Digital Assets is approved and a permanent government institution dedicated to crypto is established.

Terra’s fall has alerted everyone

The committee is a reform and expansion of an existing body that oversees digital assets, and it is supposed to improve policy efficacy by streamlining the government’s crypto supervision operations.

Hwang Seok-jin, a professor at Dongguk University, suggested that “a ministry should be established to protect digital asset investors at the same level as stock investor protection,” according to a translated version of the original report which appeared in Korean.

The professor also compared the daily cryptocurrency trading activity in the country to that of the Kosdaq stock exchange, implying that the business should be treated similarly to regular equities.

Terra Luna 2.0 was released on May 27th at a price of $17.8 and immediately plummeted by 80% on day one. Following the launch, LUNA hit an all-time high of $19.54 before plunging below $6 the next day. It sank to its lowest point of $4.39 over the weekend, raising fears of another collapse.

However, the crypto skyrocketed nearly 90% once Binance listed Luna, allowing an influx of investors to purchase the coin. Luna has dropped double digits today and is now down 16%, as purchasing pressure has receded. Terra’s and its founder Do Kwon’s trust is eroding, and the cryptocurrency is no longer the most sought-after as it once was.

Terra’s UST Burn Proposal Gets the Green Light

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All TerraUSD (UST) tokens retained in the project’s community pool, as well as UST utilized for earlier Ethereum liquidity incentives, will be burned, according to the Terra governance system.

This translates to, moreover, 1.3 billion UST, or nearly 11% of the current 11.2 billion supply, according to CoinGecko. The proposition received 99.3% of the total votes cast in favor of it. After the voting period ended, Terraform Labs, Terra’s main development corporation, will carry out the burn.

There will be two steps to this procedure. To begin, around 1 billion UST will be transferred from Terra’s communal pool to a burn module, where it will be permanently removed from the supply. The team will then manually bridge 370 million UST from the Ethereum network to Terra and destroy them, as described in a Terra governance forum explanatory article.

UST burn process will begin soon

The dollar-pegged algorithmic stablecoin plummeted from $1 to $0.04 earlier this month before resuming trading at $0.03. It is now worth 96 percent less than it was before the loss of dollar parity.

Terraform’s resuscitation plan to rebuild the Terra network and issue LUNA 2.0 tokens was approved by Terra’s governance system a day before the burn.

Earlier this month, a request to burn TerraUSD was approved. However, due to technical issues with the concept, it was never realized. According to the new proposal, “the earlier plan attempted to withdraw more from the communal pool than was available, and hence the execution failed.”

The reduction will account for about 8% of total production, perhaps bringing it closer to its original dollar peg.

The relaunched chain will go live today, followed by an airdrop of the new LUNA 2.0 coins to Terra-based asset holders. The new Terra blockchain, on the other hand, will be devoid of UST tokens, and their use will be limited to the original Terra network.