The recent collapse of the stablecoin project known as Terra is one of the biggest disasters in the history of cryptocurrenciesremoving hundreds of billions of dollars from the market.
In response, columnist David Z. Morris wrote a provocative articlecomparing Do Kwonthe founder of Terra, to Elizabeth Holmes, founder of Theranos, who is awaiting a criminal conviction for fraud – a fate, according to Morris, should also befall Kwon.
This opinion is understandable. Like Holmes and his failed blood-testing startup, Kwon relentlessly promoted a project that was a failure from the start and responded to criticism with hate and name-calling (“I don’t argue with the poor.” is one of his best-known phrases. ). Worse still: Kwon’s blunders involved not only wealthy investors – as was the case with Theranos – but also thousands of ordinary people.
What Kwon did was really bad, but that doesn’t necessarily mean it was against the law. People do terrible things every day – like refusing to help a puppy or responding poorly to grandparents – but for some reason these acts shouldn’t be considered criminal. And that could be the case with Kwon.
Fraud or reckless management?
According to Randall Eliason, a law professor and former white-collar crime prosecutor, any criminal case should demonstrate that Kwon committed fraud rather than managing recklessly — a task that is by no means an easy task.
“When hedge funds and the like lose a lot of money, it doesn’t mean there is fraud. Prosecutors need proof that they are not just a bad idea or a spectacular failure.
Compiling such evidence is a challenge, Eliason added, because criminals are unlikely to present their fraudulent schemes via email, for example.
“You don’t often find emails like this. It’s more of an accumulation of stuff and a lot of circumstantial evidence,” he said. “You won’t have classic hard evidence.”
He added that the reasons for a market disaster might be obvious at first sight, but not in advance – a point which is underscored by the fact that no one has gone to jail for the reckless decisions that have led to the financial crisis of 2008.
Of course, that doesn’t mean Kwon will escape prosecution in the United States. UNITED STATES. The scale of Terra’s collapse, as well as the murky agreements around revive UST and LUNAindicate that the authorities are likely to investigate and possibly find irrefutable evidence.
There is also the question of AnchorTerra’s investment platform, which promised guaranteed returns of 20% – an offer so irresponsible and stupid that it borders on crime.
It can be expected that criminal organizations like the SECOND — responsible for regulating the US investment market — hit Kwon with all he could in terms of fines and professional penalties.
It’s safe to say that Kwon will be banned from involvement with any securities-related company in the United States and will avoid stepping on American soil for the foreseeable future.
Meanwhile, if US prosecutors are unable to present a criminal case, that may not be the case in Kwon’s homeland (in south korea), where the Terra debate culminated in government investigations and a series of civil actions.
One of the lawyers involved in these actions told a south korean newspaper that Kwon “may be punished for fraud if Terra’s Anchor protocol is found to be a Ponzi scheme”.
Kwon’s public relations firm declined to comment immediately regarding the founder’s possible exposure to criminal charges.
The moral of the story is that, like other people who act in bad faith, Kwon will see his reputation tarnished, but for now, it doesn’t look like he’s going to jail anytime soon.
*Translated by Daniela Pereira do Nascimento with the permission of Decrypt.co.