LUNA-UST collapsed by 98 percent, dropping from $79.8 per token on May 7, 2022 to a mere $0.9 on May 11, 2022 and about $40 billion was wiped out in a matter of days, leaving investors and institutions reeling from the sudden plummet. As the dust begins to settle, all eyes turn to the founder and CEO of the Terra blockchain, Do Kwon.
The crash of the Terra ecosystem sent shockwaves throughout the crypto industry. The blockchain’s native cryptocurrency, LUNA, collapsed by 98 percent, dropping from $79.8 per token on May 7, 2022, to a mere $0.9 on May 11, 2022.
The result? About USD 40 billion was wiped out in a matter of days, leaving investors and institutions reeling from the sudden plummet. As the dust begins to settle, all eyes turn to the founder and CEO of the Terra blockchain, Do Kwon.
There has already been a massive backlash against Kwon. He is believed to have hyped and promoted a project with shaky legs. He is also known for vehemently defending the project, lashing out at anyone who questioned its credentials. “I don’t debate the poor” is one of his most criticized responses on the internet.
While comments like this are definitely not acceptable, they aren’t illegal – and this is exactly the point. We can argue that what Kwon did was reckless and his mismanagement led to thousands of investors losing their hard-earned money, but can we prove what he did was illegal? Most likely not, and this is why white-collar prosecutor, Randall Eliason believes that it is highly unlikely that Kwon will serve any jail time.
Eliason told Decrypt that a criminal case requires one to prove fraudulent activity, which is seldom possible. “When hedge funds and others lose a lot of money, it doesn’t mean there’s fraud. Prosecutors would need some evidence that it’s not a bad idea or spectacular failure,” he said. A case in point is the callous management decisions during the 2008 housing loan debacle, for which no single person was ever held accountable.
However, he added that it would not translate into Kwon coming out of it unscathed. The sheer size of the Terra catastrophe, coupled with poor management decisions, would attract scrutiny from the law enforcement authorities.
Moreover, the Anchor Protocol, from where it all started, was offering returns as high as 20 percent on token deposits. Experts believe this is too good to be true and a glaring red flag. Financial regulators like the US Securities and Exchange Commission (SEC) are also expected to clamp down on Kwon with penalties or fines.
And it’s not just US lawmakers looking to bring Kwon to book. In South Korea, investors and lawmakers are calling for government investigations and civil lawsuits. One of the lawyers involved in the proceedings spoke to a Korean news outlet recently, he said that Kwon “may be punished for fraud if Terra’s Anchor protocol is proved to be a Ponzi scheme.”
Related : Can Terra CEO Do Kwon End Up In Prison Over UST & LUNA Scam?
Some of Kwon’s actions before the crash are also being questioned. For instance, Bitcoin News reported that Do Kwon shut down Terraform Labs headquartered at Busan in South Korea a few days before the Terra collapse. According to the Korean Supreme Court filing, all the company’s holdings were also liquidated on 30th April 2022. FX Street reported that a Singapore LUNA investor has filed a formal complaint with the police and called the Terra crash a “cryptocurrency scam.”
It is certain that law enforcement agencies will do their best to investigate the entire incident. Non-criminal agencies like SEC will also come down hard on Kwon, slapping him with several fines and penalties. It is also likely that he will be barred from ever entering or starting any sort of securities-related enterprise in the US. However, when it comes to the question of jail time, we will just have to wait and watch.
