Crypto King’ Do Kwon, behind TerraUSD & Luna, pleads guilty to ₹3.5-lakh-crore fraud
In a stunning turn of events, South Korean entrepreneur Do Kwon, known by some as the “Cryptocurrency King”, has pleaded guilty to conspiracy to defraud and wire fraud. Kwon, the co-founder of Terraform Labs, was behind the cryptocurrencies TerraUSD (UST) and Luna, which lost a staggering $40 billion (approximately ₹3.5 lakh crore) in 2022.
The collapse of the TerraUSD and Luna cryptocurrencies sent shockwaves through the global financial markets, leaving many investors and users wondering what had gone wrong. The investigation that followed revealed a complex web of deceit and fraud that led to Kwon’s guilty plea.
Kwon, who was facing up to 25 years in prison, may have reduced his sentence to 12 years with his admission. The plea deal is subject to approval by a US court.
So, who is Do Kwon and how did he rise to prominence in the world of cryptocurrency?
Do Kwon, a 31-year-old South Korean national, co-founded Terraform Labs in 2018 along with fellow entrepreneur Daniel Shin. Terraform Labs aimed to create a decentralized financial ecosystem that would revolutionize the way people interact with money. The company’s flagship products were TerraUSD (UST) and Luna, which were designed to be stablecoins and a sister cryptocurrency, respectively.
UST, also known as TerraUSD, was marketed as a stablecoin that would maintain a 1:1 peg with the US dollar. This meant that users could deposit their US dollars into the TerraUSD ecosystem and receive an equivalent amount of UST tokens. The idea was to create a decentralized alternative to traditional stablecoins, which are often backed by fiat currencies.
Luna, on the other hand, was a sister cryptocurrency that was designed to stabilize the TerraUSD ecosystem. Luna was initially pegged to UST, but its value was also tied to the market’s perception of TerraUSD’s stability.
In 2022, the TerraUSD and Luna cryptocurrencies experienced a meteoric rise, with their combined market capitalization reaching over $40 billion. However, things took a turn for the worse in May 2022, when the TerraUSD stablecoin lost its peg to the US dollar. This sent a ripple effect through the cryptocurrency markets, causing the value of Luna to plummet.
As the dust settled, an investigation revealed that Kwon and his team had been engaging in a series of fraudulent activities, including manipulating the price of UST and Luna, and using investor funds to prop up the value of their own cryptocurrencies.
The US Department of Justice (DOJ) accused Kwon of conspiracy to commit wire fraud and securities fraud, alleging that he and his co-conspirators had engaged in a “multi-year scheme” to defraud investors.
Kwon’s guilty plea marks a significant turning point in the case, as it provides evidence that he was aware of the fraudulent activities and actively participated in them.
So, what does this mean for the future of cryptocurrency?
The collapse of TerraUSD and Luna, and the subsequent guilty plea of Do Kwon, serves as a stark reminder of the risks and uncertainties involved in the world of cryptocurrency. While cryptocurrency holds immense potential for innovation and disruption, it is also vulnerable to manipulation and fraud.
The case also highlights the importance of regulatory oversight and investor protection. As the global cryptocurrency market continues to grow, it is essential that governments and regulatory bodies take steps to ensure that the industry is transparent, accountable, and fair.
In conclusion, Do Kwon’s guilty plea marks a significant milestone in the investigation into the collapse of TerraUSD and Luna. While the case serves as a cautionary tale, it also underscores the importance of innovation, regulation, and investor protection in the world of cryptocurrency.
