This kwomedy is not funny at all: Terra co-founder says LUNA’s fall was a “massive failure in risk assessment,” but not a scam

Notorious Terra co-founder Do Kwon says the charges against him aren’t legitimate and are politically motivated, also he has denied claims that he is on the run from law enforcement. In a fresh interview with Laura Shin on the Unchained Podcast, Kwon revealed that he moved from South Korea before Terra/LUNA collapsed, but doesn’t tell where.

“We are a little bit disappointed in the way that prosecutors are attempting to create new regulation through criminal court proceedings, whereas that should be within the job description of the legislature, or at the very least the financial regulators,” Terra’s co-founder stated.

Kwon insists that Terra’s collapse was caused by a massive market failure, but not a scam. 

“I think… a massive failure in terms of proper risk assessment…I saw UST as that thing that was almost inevitable and was poised to become the money for all of crypto,” he added.

“The way that I think about it is, I am but 31, and I would still love to contribute,” he says. 

This August, Kwon launched the LUNC coin (Terra Classic). Actually, it’s just a new ticker of LUNA. And the stablecoin UST is now called TerraClassicUSD (USTC). It would seem that who would walk into the same trap twice? But people keep buying these tokens!

Kwon continues to say he’s pleading guilty.

“I own up to the responsibility fully. It’s not easy — the hardest thing about the current situation is having to be content with so much astronomical loss. It’s quite hard to put into words, but the scale of the financial, emotional, and economic damage that happened here is not easy to live,” he responds.

Who is Do Kwon?

Do Kwon (real name Kwon Do-hyung), 31, became internationally known as the co-founder and CEO of Singapore-based Terraform Labs several years ago. His company used blockchain technology to develop a more efficient payment system. Terra’s stable-priced cryptocurrency (stablecoin) allowed his company to attract 40 million users when it launched in January 2018 and $32 million in investments from Binance, Arrington XRP, Polychain Capital, and others. The TerraUSD stablecoin (UST) and the LUNA coin have allowed thousands of people to become rich, but even more have gone bankrupt.

Kwon denied claims that $65 million in bitcoin belonging to Luna Foundation Guard, a nonprofit organization that supports the Terra ecosystem, was transferred to cryptocurrency exchanges KuCoin and OKX in September. He said that if funds were transferred to the exchange, it does not mean they were sold. 

Kwon added that he has hired a chain analysis company, which has been given all the Luna Foundation Guard trading data. And within a couple of weeks, it will release a report that “will bring a lot more clarity.” 

“There isn’t any embezzlement or theft of the funds or anything to that effect that seems to be cycling through the media,” he says during a recent interview.

According to South Korean media reports, officials have frozen about $66 million in assets that belong to Kwon. He stated that he did not know whose money it was.

What’s happened to Terra/LUNA?

The problem was that Terra was not backed by real assets. It was the so-called algorithmic stablecoin. So after the fall of Terra/LUNA, $60 billion was eliminated.

The UST and Luna worked in conjunction. The price depended on computer code that automatically stabilized the value, creating and destroying UST and Luna depending on supply and demand. The UST price was always supposed to be in the $1 range. However, when the price of Luna became volatile, investors rushed to buy both tokens, causing the value of UST to plummet as well. Luna Foundation Guard tried to restore UST’s peg to $1 by spending almost all the bitcoins from its reserve (to the tune of about $3 billion), but that never helped. As a result, the TerraUSD Stablecoin price flew toward zero, followed by LUNA. 

Crypto investors who lost their money were thrown into despair, many so mired in debt and problems that they contemplated suicide (and the number of actual cases remains unknown). 

A warrant for the arrest of Do Kwon, co-founder of Terraform Labs, where the sister tokens of Luna and TerraUSD were stored, was issued shortly thereafter. However, he is still at large, although his company has already had several arrests.