The man responsible for one of the biggest crypto crashes is officially at large

News hardware The man responsible for one of the biggest crypto crashes is officially at large

Last May, the crypto ecosystem experienced an unprecedented uptick. As Bitcoin continued to fall, the price of the popular cryptocurrency Terra (LUNA) and its stablecoin (UST) pushed a straight line all the way to $0. Four months after the industry-wide incident, Terra’s founder Do Kwon is standing in South -Korea for an arrest warrant.

Crypto: What is Terra (LUNA)

Several projects are emerging in the crypto sector to meet the need of this emerging ecosystem. The Terra project and its cryptocurrency LUNA are among the innovative projects based on blockchain technology. Terra, built by Do Kwon, aimed to create a decentralized algorithmic “stablecoin”: the UST.

A stablecoin is a cryptocurrency that aims to maintain a stable price, such as a fiat currency such as the dollar or the euro. This type of cryptocurrency is very important for the crypto sector. Indeed, with these stable tokens, you can protect yourself from the extreme volatility that prevails in the market. In particular, they are used as an exchange token in cryptocurrency peers. For example, if you want to buy Bitcoin or Ethereum, the accepted common currency is the stable cryptocurrency Tether, USDT. Tether is a stablecoin that keeps up with the price of the dollar as each of the digital coins is backed by a US dollar, just like gold and the dollar at the time.

In a logic of decentralization, Terra wanted to develop a stable cryptocurrency that does without classic fiat currencies such as the euro or the dollar. The company thus created the UST, a decentralized algorithmic “stablecoin” “backed” by its cryptocurrency LUNA.

To stabilize, the UST works through a computer algorithm that balances values ​​through a collateral system. In short, the stablecoin settled for a value of $1 thanks to community arbitrage. Specifically, if the UST falls to $0.98, then it is worth trading it for $1 worth of LUNA. Conversely, if it rose in value to $1.02, it made sense to generate one against $1 worth of LUNA cryptocurrency.

However, nothing went as planned…

What happened to the UST and LUNA cryptos?

Last May, the LUNA cryptocurrency started a monumental decline, scaring the entire crypto market. The cryptocurrency founded by Do Kwon went from $80 to $0, leaving many investors on the chopping block. This fall has been one of the biggest cryptocurrency crashes to date.

LUNA Chart

When it fell, LUNA dragged down its stablecoin, UST. In short, investors withdrew $40 billion from the protocol, causing the algorithmic system to derail, creating a downward spiral in the price of the UST stablecoin.

UST stablecoin chart

The man responsible for one of the biggest crypto crashes is officially at large

This event caused widespread panic, causing the price of the two cryptos to be worth less than a penny.

The effects of these adventures are still being felt 4 months later, mainly due to the massive loss of confidence of certain LUNA investors. Several people who bought LUNA or UST find themselves with 0 €. To bring justice to those who lost their savings due to this crypto disaster, South Korea has issued an arrest warrant against Terra founder Do Kwon.

Arrest warrant issued by South Korean targets Do Kwon

While the project manager was already the subject of a class action lawsuit organized by US investors, Do Kwon made a new enemy. Indeed, the person responsible for the project would be the target of an arrest warrant in his country of origin, South Korea.

The move was taken by the financial crime unit of Seoul’s Southern District, South Korean media outlet Chosun Ilbo reports. Do Kwon and its partners are accused of, among other things, not respecting laws specific to the capital markets. According to South Korean justice, the cryptocurrency LUNA and its stable currency UST are financial products, therefore they should have been handled under the supervision of a financial authority.

Currently in Singapore, Do Kwon is currently escaping justice in his country. However, he could soon be part of Interpol’s “red notices”. In this context, an international arrest warrant should soon be issued against Terra’s founder and some associates.

These allegations can cost the founder dearly, even leading to the “permanent loss” of the new LUNA and the old LUNC. Despite the events and context, the two cryptocurrencies continue to create parabolic speculative moves as the project stands still and has many flaws. However, if the charges come to an end, the two cryptocurrencies can be removed from most platforms for legal reasons.

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