As UST/LUNA fails to rise from the extreme crash, allegations of manipulating the liquidity surround the CEO of Terra ecosystem, Do Kwon. According to a Twitter user, FatManTerra, Do Kwon, and many Terra influencers were involved in draining liquidity from LUNA/UST before the crash, which the CEO strictly denied.
Do Kwon, formerly known as the genius and mastermind in the crypto world, is now surrounded by allegations following the Terra coin’s crash. The CEO had claimed he had bought Bitcoin reserves to save LUNA in case of a crisis, but those reserves were nowhere to be seen when the coin actually crashed.
The great crypto crash that came in the first week of May 2022, swept almost every cryptocurrency’s position in the market. Even the strongest coins like Bitcoin, ETH, SOL, etc. failed to maintain their resistance and support level.
As a result, almost every digital currency was able to manage the crash somewhere, except LUNA/UST which crashed so badly with no hope of recovery. The Terra team tried saving it through LFG reserves, still, the coin went weak until no power was left in it to survive the crypto winter.
Based on Do Kwon’s statements, the Terra blockchain was trying its best to recover from the crash but a Twitter user FatManTerra stripped the curtain behind the crash by posting a thread.
FatManTerra exposes Do Kwon
The user claimed that Do Kwon took out $80 million every month for almost three years. Which is around $2.7 billion. According to various sources, the CEO knew about the crash and he deliberately drained the liquidity out of LUNA, now known as Classic LUNA (LUNC) and UST or TerreaUSD Classic (USTC).
FatManTerra also added that Do Kwon used Degenbox, a borrowing protocol where people can loop stablecoin buys, to cash out from the reserves and managed to maintain the liquidity of the Terra coins artificially no one could suspect what happened in the background.
Do Kwon responds to allegations
As soon as the rumors spread on Twitter, Do Kwon released an official statement and denied the allegations. He said, “This should be obvious, but the claim that I cashed out $2.7B from anything is categorically false.”
He addressed the allegations by saying that the rumors about him taking out $80 million every month from LUNA/UST reserves are baseless since he is still the owner of LUNA holdings. He also added that his income salary came from TerraForm Labs, instead of the reserves.
His official tweet reads:
Do Kwon ended the thread by asking his followers to not believe every rumor and to give evidence before making allegations. The CEO has been facing a lot of backlash from the crypto community following the LUNA/UST crash, which makes it harder for the new LUNA fork to gain traders’ trust.
Do Kwon under investigation in South Korea
In May 2022, The Seoul Southern District Prosecutors’ Office announced an official investigation against Do Kwon over the LUNA/UST crash that cost billions of dollars in loss to traders and investors around the world.
According to the SBS News report, the case was filed in the Financial and Securities Crime Joint Investigation Team to probe TerraForm Labs and Do Kwon. The investigation was made following two complaints filed by five crypto companies and 81 investors against Do Kwon and co-founder Daniel Shin. “Terraform founders and the company deceived investors with their flawed algorithmic coins,” written on the official documents.
The Lawyer for the five crypto companies explained, “The design and issuance of Luna and Terra to attract investors, but the failure to properly inform them about the flaws and the unlimited expansion of Luna’s issuance amounted to defrauding investors.”
In other words, Do Kwon is facing a lot of criticism and allegations from the public and companies around the world. The world’s third-largest digital currency that had so much potential a year ago is now nothing but an abandoned classic coin after being drained out due to the crypto crash.
Whether the allegations against Do Kwon are true or not, it still doesn’t change the fact that thousands of traders lost their money to Terra’s coins. Although Do Kwon did announce compensation through the LUNA fork, it will still take a long time for traders to finally trust the company and digital currency again.