The founder of a $60 billion stable coin project that collapsed last month has a knack for convincing people to buy what he sells. A new kind of payment system that would upend the status quo and replace the world's currency was recently sold by Kwon.
TerraUSD and luna moved in lock step. luna helped UST keep its peg and earned investors a lot of money as it appreciated in value. The luna was up 15,800% in 2011. The system allowed traders to make money from deviations in the price of the two token.
The setup has been around for a long time. Stable coins, which rely on a complex set of code rather than hard currency reserves to stabilizing their price, have been around since at least 2015.
He had a great deal of experience in marketing. He put himself in the likeness of a person known as the founder of the digital currency, a person who is also a tech billionaire.
He raised $207 million for his Terraform Labs, which launched luna and UST, and his almost shameless level of online braggart, in which he avoided the poor on social media. He inspired a cult-like following of self-identifying LUNAtics, including billionaire investor Mike Novogratz, who went so far as to memorialize his membership in this club with a tattoo on his arm.
The outsized return on Terra's anchor platform could have been a red flag for investors. Analysts thought it was unsustainable. Savings accounts paid less than 1% and government bonds paid 2%. The market value of luna and UST at one point was almost $60 billion.
Both token are worthless right now. The failure wiped out half a trillion dollars from the sector's market cap. It made investors less confident in the space.
The first attempt at launching a stable coin was a failure, with losses in the range of tens of millions of dollars.
The investors are jumping back in with him because he is already on his third attempt at launching his own coin. The government probably won't be as kind.
There is a possibility of civil or criminal proceedings against Terraform Labs. In a worst case scenario, former federal prosecutors and regulators tell CNBC that the stable coin chaos could lead to fines, penalties, or even imprisonment.
It is not a crime to be a bad businessman in America.
It is necessary for prosecutors to prove beyond a reasonable doubt that Kwon and his associates committed criminal fraud and that they deceived investors.
Randall Eliason spent 12 years as an assistant U.S. attorney for the District of Columbia and prosecuted white- collar cases.
We are trying to prove what happened to someone. It is a very lengthy process that involves reviewing lots and lots of documents, talking to many, many people, and dealing with all their lawyers through that process. He said that no one should expect anything to happen in a day or two.
According to a former federal prosecutor and trial attorney who has represented clients in securities class actions, prosecutors have to prove a person's state of mind beyond a reasonable doubt in order to prove a false statement.
We don't have a magic telescope to read a person's mind, so prosecutors rely on emails, texts, and other statements.
The hope is to find a smoking gun, but prosecutors rarely find emails or text messages that detail the fraud scheme.
The prosecutors look for small amounts of information and communications. One way to build a fraud case is to work up the ladder, building cases against lower-level participants, and then persuading them to testify.
The example of Theranos, which used other companies' machines to run blood samples, but told investors that it was using its own machines, was cited by Eliason.
Eliason said that things like that are suggestive of intent to deceive and defraud.
White-collar cases take a long time. The sentencing can be severe if they are eventually found guilty.
He pleaded guilty to one count of securities fraud and was sentenced to more than seven years in prison. A Swedish national was sentenced to 15 years in prison for securities fraud, wire fraud and money laundered in the US.
Do Kwon, co-founder and chief executive officer of Terraform Labs, poses in the company’s office in Seoul, South Korea, on Thursday, April 14, 2022.The burden of proof for civil cases is usually based on a "preponder of evidence."
Civil, regulatory, and administrative remedies are often used in these types of cases.
There could be lawsuits from people who think they were burned.
According to local media, a group of investors in South Korea have come together to file a complaint against Kwon and his Terraform Labs co- founder. Attorneys from the law firm that brought the suit did not respond to questions.
Civil penalties can include fines from regulators like the Securities and Exchange Commission.
The SEC would only have to prove its case by a certain amount of evidence, meaning a jury would have to find in favor of the SEC.
Penalties could include injunctions, disgorgement, or fines based on the amount of the loss, which could be pretty staggering given the tens of billions of dollars that was wiped out There is a complicated history with the SEC that involves dodging a few subpoenas and filing a motion opposing them.
While she does not comment on any ongoing or potential litigation, the Commissioner of the Commodity Futures Trading Commission said that the agency was among the first to prosecute wrongdoing in Cryptocurrencies.
Outside the U.S., he could be facing backlash in South Korea, where he currently lives, and Singapore, the official headquarters of Terraform Labs.
The country's national tax agency has ordered Kwon and Terraform Labs to pay back taxes, according to reports. TheYeouido Grim Reaper, a special unit dedicated to investigating financial and securities crimes in South Korea, has been reborn to investigate the Terra collapse.
He is not in the US so there are issues with jurisdiction. South Korean authorities may have something to say. There are a lot of agencies and governments that could look into this conduct.
Terraform Labs' in-house legal team resigned after the crash. NBC reached out to the team members on the internet. All three indicated on their profiles that they left the company, but they did not reply to requests for comment.
Recent times have been challenging for Terraform Labs, with a small number of team members leaving, but the vast majority of team members remain committed to carrying out the project's mission.
He hasn't missed a beat.
The founder of Terraform Labs had a plan to replace the failed UST stablecoin with a new token. While the tally was underway, participants overwhelmingly voted in favor of following through with that plan and reviving the failed venture.
Two days into the vote, Terraform Labs made some technical changes that were brought to the community's attention, according to a Terraform Labs spokesman. Five days were left to vote on the amendment. People who disagreed with the amendment were encouraged to change their vote.
The luna is down more than 10% over the last 24 hours, but the effort has a lot of big-name backers pushing for it to succeed
The institutional and retail investors who were wiped out could get a chance to recover their losses. The token recovery plan was the only chance for investors to get their money back because there was no backstop from the FDIC.
Lightspeed Venture Partners was one of the major backers of Terraform Labs. Three Arrows Capital invested in the luna token.
The founder and CEO of Binance got in. According to an article titled, "Binance's luna investment was worth $1.6 billion", the net worth of the man is $16.9 billion. It's less than $3000 now.
The luna token will be relaunched and re listed. The coin was added to the exchange on Tuesday and immediately saw a price increase.
The only person taken in by authorities has been accused of ringing the doorbell of a man in South Korea and asking if his wife was home. According to a report from the South Korean newspaper, the suspect who lost as much as $2.3 million after Terra's collapse is facing charges.
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