Crypto Crash: an arrest warrant issued by the co-founder of Luna

Crypto Crash: an arrest warrant issued by the co-founder of Luna

Account in the crypto industry appears to be on the way.

Nearly four months after the collapse of Luna and UST, or TerraUSD, two sister tokens released by Terraform Labs, the authorities seem ready to shed light on the causes and those responsible for this path.

The crash wiped out at least $55 billion, contributed to the bankruptcy of prominent cryptocurrency lenders and the ruin of a stellar hedge fund, swallowing the savings of many retail investors.

A South Korean court has just issued an arrest warrant for Do Kwon, co-founder of Terraform Labs, and five other people, according to media reports. They are accused of violating local market laws.

Those six people live in Singapore, says Bloomberg, which cites a text message with the prosecutorial teams that issued the arrest warrant.

The first domino to fall

Luna and UST were the first dominoes to collapse in what would later turn into a liquidity crunch for the crypto sector.

The two distinct tokens crashed after the Earth’s treasuries lost their peg to the dollar, their basis qualifying as a stablecoin. These cryptocurrencies are linked to more stable assets, such as the US dollar or gold. From May 9 to May 13, at least $55 billion of market capitalization disappeared, causing many investors to suffer huge losses.

Underground treasuries were an algorithmic stablecoin, which was backed not by dollar reserves but by its sister asset, the Luna. Algorithmic stablecoins differ from centralized alternatives such as Tether or USD, which are backed by physical dollars or equivalent assets stored in a bank.

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The fall of these two coins hit hedge fund Three Arrows Capital, aka 3AC, which found itself unable to meet its payments to crypto lenders including Voyager Digital and Celsius.

Voyager and Celsius filed for bankruptcy, while 3AC was forced into liquidation.

The fall of TerraUSD sparked investigations in the US and South Korea and revived calls for stricter oversight of stablecoins. Institutional investors give this to cryptocurrencies because they are designed to be less volatile than other currencies and to enable funds to move easily within the crypto ecosystem.

Last June, Terraform Labs employees reportedly told the US Securities and Exchange Commission that Do Kwon was cashing out $80 million per month before the collapse of UST and Luna Tokens.

According to reports, employees said they expected Tira and Luna to collapse and pointed out the danger to Do Kwon several times, but were ignored.

Luna 2.0

The Securities and Exchange Commission reportedly found that a few months before Terra’s collapse, about 100 billion won, or $78.1 million, of the company’s money went each month to cover operating expenses.

The federal agency is investigating whether marketing the floor tanks prior to their crash violated federal investor protection regulations.

In his first interview after the collapse of Luna and UST, Do Kwon said last month that he is cooperating with authorities in their investigation. In May, he proposed a new series to replace the existing Terra network. Luna 2.0 will replace the current Luna, which will be renamed Luna Classic.

A majority of voters approved co-founder Do Kwon’s plans to revive the devastated ecosystem. The new system “will effectively create a new Tera chain without the stable algorithm.”

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โ€œThe old series will be called Terra Classic (token: $LUNC), and the new series will be called Terra (token: $LUNA). The series upgrade will begin a few hours after the launch shot,โ€ the company tweeted to Time.

“Terra 2.0 is coming,” the company wrote on Twitter. โ€œWith overwhelming support, the Terra ecosystem voted to pass Proposition 1623, which calls for the creation of a new blockchain and the preservation of our community.โ€

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