Do Kwon, the maligned founder of Terraform Labs, has been issued an arrest warrant by South Korean authorities on breaches to capital markets law.
According to Bloomberg, the Seoul courts issued a warrant for Do Kwon and five others, all of whom currently reside in Singapore.
Do Kwon became a pariah after his supposed stablecoin TerraUSD (UST) collapsed in May, bringing sister token LUNA down with it in a spectacular US$60bn crash.
When asked by Coinage in August if he would ever return to South Korea to face the music, Do Kwon said: “It’s kind of hard to make that decision, because we’ve never been in touch with the investigators…They’ve never charged us with anything.”
Terraform Labs co-founder Do Kwon spoke with Coinage in August in first appearance since Terra’s crash – Source: YouTube screenshot
However, South Korean prosecutors raided the home of Terraform Labs co-founder Daniel Shin on allegations of illegal activity behind Terra’s collapse and now that Seoul prosecutors have officially levied charges, Kwon has yet to express his cooperation.
Amid the legal troubles, the legacy Terra LUNC coin is facing its own crisis after enjoying a stunning rally in recent weeks.
A short-lived short squeeze
Reading the tea leaves, we can see a bearish engulfing pattern forming on the LUNC/BUSD chart.
LUNC’s unexpected rally began drawing back earlier this week – Source: binance.com
This could signal further negative price action to come.
As it stands, LUNC’s exchange price of less than US$0.0003 represents a drawdown of 65% from last week’s high.
In straight terms, LUNC’s current market capitalisation of US$1.77bn represents losses of around US$2bn in just six days.
Why is LUNC down?
Now run by the community, LUNC is the original LUNA project, while LUNA is Do Kwon’s revamped LUNA project (I wish things were simpler too).
LUNC’s revival over the past few weeks was something of a miracle.
Once among the largest cryptocurrencies with a US$40bn market valuation under its original ticker LUNA, it became essentially worthless in a matter of days after suffering one of the most spectacular crashes in the history of the digital asset market this May.
Do Kwon may have abandoned stakeholders and refocused his attention on a fresh relaunch, but for token holders with billions on the line, the story wasn’t over.
Inspired by prior meme stock rallies – think GameStop (NYSE:GME) and AMC – investors rallied around a short squeeze.
It was going well for a while, reaching its peak last Thursday September 8 when it hit a market valuation of over US$3.6bn; not bad for a project abandoned by its maker.
A deflationary tokenomics revamp and fresh support from a few major exchanges helped spur the token up over 360% in two weeks alone.
But just as we saw with GameStop and AMC, a short squeeze can only squeeze for so long and it looks like the grip is slipping on LUNC.
Top holders may have exited their positions en masse following the rally, or the short squeeze was an unsustainable bubble… likely a mixture of both is the culprit.
For what it’s worth, LUNA – the rebranded one headed by Kwon that is – is faring far worse, having shed around 30% of its market valuation today alone.
The bottom line? The community-run Terra LUNC project is worth around five times more than Do Kwon’s LUNA coin, but both are bleeding value.
Utility, what utility?
With all the furore over Do Kwon’s arrest and LUNC’s revival, it’s easy to forget that Terra 2.0 (that's Do Kwon's project) is meant to be a blockchain ecosystem with some real-world use to justify its existence.
So what is Terra LUNA actually being used for?
Not much by the looks of it.
Around 30 projects have been built using Terra 2.0 protocols, predominantly generic decentralised exchanges and barren NFT marketplaces.
That’s the challenge for Do Kwon’s revamped Terra 2.0: without some genuine utility it’s doubtful whether it has much potential in a crowded blockchain marketplace.
As for LUNC, it looks to be heading in a downward position for the moment but given the utter unpredictability of the markets, the story might be different next week.