South Korea: the “mea culpa” of the “crypto guru” after the collapse of its luna currency

A trading floor in Seoul (illustrative image).

AFP - JUNG YEON-JE

Text by: Louis Palligiano Follow

3 mins

The co-founder of the cryptocurrency terraUSD, Do Kwon, has just made his

after the brutal collapse of his “stablecoin” luna last May which caused investors to lose $ 40 billion, and more than 500 billion on the market. cryptocurrency market.

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With our correspondent in Seoul

, 

Before becoming the pet peeve of many disappointed investors,

, who was sometimes dubbed the " 

"

had achieved a course that had everything of the

.

After having cut his teeth at Apple and Microsoft, the young South Korean graduate of Stanford decided to launch his

in 2018 with the ambition of creating a more efficient payment system based on blockchain technology.

The idea is to be based on

, or stable cryptocurrency in French, whose value is in principle backed by that of a traditional stable currency like the dollar to allow investors to benefit in theory from safer investments.

Propelled by a fundraising of nearly $40 billion, terra will peak in value in April 2022 to become the fourth leading

and tenth largest cryptocurrency by market value.

But the euphoria will be short-lived since a month later, the tumble begins.

In twenty-four hours, terra lost more than 50% of its value and threw the market into panic.

A fraud-like project  

And the consequences will be catastrophic with more than 500 billion dollars evaporated and in particular many small investors who lost all their savings since after the

and its twin token luna fell to zero, the currency reserves could no longer ensure the stability of certain cryptocurrencies.

Instead, and this was the case for terra, an algorithm took care of the arbitrations based on the supply and demand of another cryptocurrency.

As the latter also collapsed, the domino effect set in, causing panic among investors who tried to withdraw their money.

By promising a stable return of 20% to maintain demand, the structure implemented by Do Kwon looked like a Ponzi scheme, according to many observers.

But the terra executive still maintains that while his bet on the algorithmic

did indeed fail, his project had nothing to do with any fraud.

The investigation by the South Korean authorities

As nearly 280,000 people saw their investments go up in smoke in the country, Terraform Labs is being investigated for alleged fraud and tax evasion after investors terraUSD and luna filed complaints against its boss Do Kwon and his co-founder Daniel Shin last May.

South Korean prosecutors raided the home of Shin in late July on suspicion of illegal activities behind the crash.

The company's key former and current employees are banned from leaving the territory and Do Kwon, currently in Singapore, must inform the authorities of his return.

He also indicated that he intended to cooperate with the ongoing investigation by the Korean public prosecutor's office, but refused to confirm, citing that no charges were brought against him after the collapse of terra. 

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