Updated on January 09, 2023 12:51 PM
According to a report, the South Korean Court Issues an Arrest Warrant Against Terra Co-Founder Do Kwon that includes five others.
According to the Financial Crimes Unit of the Supreme, a South Korean court has issued an arrest warrant against Kwon Do-hyung, more commonly known as Do Kwon, the co-founder and the CEO of Singapore-based Terraform Labs, the now defunct stablecoin issuer.
Bloomberg News reported the warrant also included five additional persons, citing a text message from the prosecutor’s office who is now charged with violating the Capital Markets Act.
Four months amid the collapse of the first domino to fall in this year's crypto winter,
The warrant has been issued for the $40 billion Terra ecosystem and its algorithmic stablecoin (UST).
Terra, an open source or public blockchain protocol and payment platform, which helps companies build infra for apps on which people trade. It was created by Terraform labs in the year 2018 and was co-founded by Do Kwon and Daniel Shin. Do Kwon envisioned creating a price-stable crypto payment system that can take on the biggest eCommerce platforms, and he rose to the highest tier of the crypto world- Terra, all only to fall apart within a few days in May 2022.
Terra has two stablecoins, UST and Luna, in which the public can invest their money. These two coins are managed by Terra by buying and selling in the different markets to ensure that if UST falls that Luna can back it.
And the value of its UST is pegged to $1 at the given point.
While Terra earned its profits through Luna, it was able to keep the price of UST pegged to a dollar plus it didn’t have to keep a reserve of US dollars at all times. There are in-built algorithms that are designed to balance the two systems and track the demand and supply of UST and Luna.
This whole ecosystem of Terra collapsed since there were huge drops in their prices because large investors of UST and Luna started selling these stocks.
This was followed by an industry-wide fallout, with companies like Celsius Network and Voyager Digital filing for bankruptcy as the value of digital assets slumped by more than 50% from their respective highs. After the extent of the Singapore-based hedge fund, Three Arrows Capital's exposure to the Terra ecosystem was exposed, it became the latest entity to file for bankruptcy.
The whole Crypto Universe was left in a trail of devastation and lousy debt with billions being owed to creditors after the implosion of Three Arrows.
Although its founder Do Kwon assured to control their falling prices by building reserves in another cryptocurrency- BITCOIN by using it to buy more Luna and UST, unfortunately, it did not work which cost investors tens of billions of dollars.
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