An Industry on the Ropes
Crypto’s and Terraform Labs co-founder Do Kwon is on the run.
Yes, that’s right – he’s a fugitive.
He was added to Interpol’s red list yesterday that alerts 195 countries to his status as a wanted fugitive. Today, we also found out that Kwon transferred 33,131 Bitcoins to himself right after he was added to the red list.
Kwon was the golden boy for stable coin for quite some time as the native South Korean’s brash attitude led him to billions in wealth.
His “fake it ‘til you make it” attitude has gotten him into deep water as quickly escalating investigations have been initiated against Kwon and Terraform Labs.
Why?
His brainchild Terra’s UST stablecoin lost its parity to the dollar in May in a $70 billion collapse and today shows a 99.93% loss.
Kwon and Terraform Labs fled South Korea for Singapore ahead of Terra’s meltdown, but Singapore police said on September 17 that he’d fled Singapore.
South Korean authorities want to question Kwon about alleged violations of capital markets law that has resulted in a slew of local suicides to investors who have lost everything.
Investigators also want to interview him to see if his company misled investors in labeling UST as a stablecoin.
They have said his stablecoin could achieve the definition of a Ponzi scheme.
It was only just earlier last year when Terraform Labs successfully rallied an audience of fans that called themselves the “Lunatics,” praising Kwon as the project’s outspoken hero as the price of its LUNA token rallied.
Kwon’s unique case has now set off US regulators with the intent of regulating stable coins more rigidly with even the possibility of an outright ban altogether.
The South Korean has sullied the stablecoin industry and the manhunt continues as Kwon claims he “is not hiding.”
U.S. lawmakers put forward a bill last week that would introduce a ban on UST-like algorithmic stablecoins, potentially threatening other decentralized dollar alternatives like MakerDAO’s DAI.
Cryptocurrencies have been littered with non-stop streaming of negative headlines in the past 12 months.
Bitcoin reaching $65,000 wasn’t in fact a celebration, but the calm before the storm before a myriad of structural problems was revealed as the price of Bitcoin collapsed.
Kwon's fleeing has not stopped his attempt at fixing LUNA, yet the price levels are barely a fraction of what they were before the collapse.
The international police case has heaped more fuel on the fire for incremental investors signaling them to stay away from cryptocurrencies and rightly so.
Kwon is highly likely to receive jail time in his native homeland of South Korea and legal experts can envision a prison time of over 10 years.
Financial fraud and running a Ponzi scheme are serious stuff in South Korea which is infamous as a place where Korean oligarchs regularly flout the law.
Delaying the inevitable is stirring up even more unrest for crypto as one of its big-time CEOs evades Korean law.
The longer he hides internationally, the longer the damage to the reputation of crypto.
The problem I have is that since crypto has no cash flow dispensing from it, the existence of these products enters a gray area of whether it is a Ponzi scheme or not.
Even more worrisome, stablecoins could become banned because of Kwon wiping out yet another set of crypto assets and crypto infrastructure.
It could cause yet more manhunts for crypto CEOs and the bankruptcy of the masses.
These events are highly bearish for the cryptocurrency industry, and I advise readers to head for higher water.
