Crypto star Kwon apparently fled to Europe

Interpol had already put the founder of the failed crypto project Terraform Labs on the wanted list in September. As South Korean media reports on Friday, the prosecutor’s office has now collected new evidence that heavily incriminates Do Kwon. A chat transcript is said to show that Do Kwon was personally involved in market manipulation in his function. He is said to have instructed an employee to manipulate the price of Terra/Luna.

31-year-old South Korean Kwon created the stablecoin Terra USD and its twin Luna. The system collapsed in May. The collapse resulted in losses of around $60 billion.

Crypto world rocked

The collapse of Terraform Labs, a payment platform for so-called algorithmic stablecoins, shook the entire crypto world – with consequences to this day. The case is particularly dramatic because stablecoins were actually created to bring security to the chronically nervous crypto markets. Unlike other cryptocurrencies, they should not fluctuate so drastically. The stabilization mechanism usually works by being linked to a common key currency, often the dollar. According to this system, the people behind each stablecoin balance investors’ purchases by investing equally in dollar assets.

Negative spiral leads to collapse

The Terra USD system was one of the largest stablecoins. However, it had one special feature: as a so-called algorithmic stablecoin, it was not tied to the dollar. With him, stability should be brought about by financial engineering. Behind Terra were other cryptocurrencies – in this case Luna. A terra was always worth a dollar in luna. If the price was now above one dollar, investors exchanged Luna for stablecoins and then sold them profitably on the respective stock exchange. It also worked the other way around. The course was kept constant for a long time.

But the system was not crisis-proof. As Terra fell below one dollar, investors logically exchanged the stablecoin for Luna. But when the Luna price also fell, investors also sold Luna. This negative spiral escalated to the point of collapse.

The whole system obviously only worked as long as market participants put their trust in it. At the end of the cascade there was a loss of 60 billion dollars. Many investors lost their money.

Apparently new evidence

The South Korean public prosecutor’s office announced on Friday that they now have clear indications of price manipulation. It is assumed that the crypto refugee is now in Europe. Despite the international arrest warrant, Do Kwon is at large.

Earlier this year, Kwon relocated from South Korea to Singapore, where his now-defunct company Terraform Labs had an office. He is said to have moved from Singapore to a European country via Dubai, the Korean Broadcasting System (KBS) reported that “is understood that [Kwon] is currently in Europe». Since Kwon’s passport is invalid, his mobility may be restricted.

Kwon is active on social media and denies the allegations. He also wants to explain this to the media. As long as he doesn’t travel to South Korea, he shouldn’t be bothered anyway.

With agency details.