The founder of the Earth (LUNA) to be investigated for a pyramid scheme

Do Kwon, the founder of cryptocurrency Terra (LUNA), could be criminally charged with running a pyramid scheme. According to the website YonhapSouth Korean prosecutors are weighing whether they can bring Ponzi scheme charges against Terraform Labs CEO Do Kwon, sadding to complaints already filed against the businessman regarding the dramatic collapse of Luna and UST, both with down more than 99.99% and causing losses of approximately US$40 billion.

A Ponzi scheme is a type of investment fraud where early investors profit from money obtained from new investors.

The allegation may relate to the Anchor protocol, a decentralized finance (DeFi) platform built on the blockchain of the Terra ecosystem, which promised investors around 20% in profits.

“Kwon’s comments promising revenue may provide an important clue.”

Do Kwon and Terraform co-founder Daniel Shin are also being sued by five investors who claim to have lost $1.1 million due to “fraud and other financial irregularities”indicates the website.

Always according to Yonhapthe Seoul Southern District Prosecutor’s Office handling the case assigned a team dubbed “Angels of Death” to determine whether Kwon was running a Ponzi scheme promoting unsustainable stable returns on UST deposits through the Anchor platform.

One of South Korea’s top law firms representing investors suing Kwon told Yonhap that the Anchor protocol was “unsustainable” and could be considered a Ponzi scheme.

“After reviewing the relevant laws, we are of the opinion that the protocol [Anchor] can be set up as a Ponzi scheme,” he said. “While there is no legal clause regarding stablecoins and bitcoins, there is legal precedent which we believe may apply to this case.”

According to Randall Eliason, a law professor and former white-collar crime prosecutor, any criminal case should show that Kwon committed fraud — a task that is rarely easy.

“When hedge funds and the like lose a lot of money, it doesn’t mean there is fraud. Promoters would need evidence that it’s not a bad idea or a spectacular failure. he said to Decrypt.

Compiling this evidence is a challenge, Eliason added, because criminals are unlikely to expose their fraudulent scheme in anything like an email.

Earth (Moon)

Terraform Labs emerged after another Kwon project, Basis, failed. The idea behind the new project was to create two interrelated digital currencies with very different goals, but designed to balance each other out.

One of them was TerraUSD, the Earth stablecoin, called UST. Most stablecoins are backed by real assets that reside in real bank accounts. UST, however, had nothing from the real world to back up its value.

Instead, as an “algorithmic stablecoin”, it was designed to be in a constant and dynamic relationship with another digital token, Luna, whose value would rise and fall with the market.

The trick used by Kwon to keep the currencies balanced – and keep the UST at one dollar – was the ability to trade against each other at fixed amounts even when the price of the UST fluctuated.

So, if Luna was trading at $100 and the price of UST fell a bit below $1, an investor could trade the former for the latter and profit a bit from that small price difference.

The transaction would also destroy that amount of UST, decreasing the supply and bringing the price back to equilibrium.

At least in theory.

But as the Terra Project grew, so did the chorus of concerns voiced by skeptics. Kevin Zhou, head of crypto hedge fund Galois Capital, has been predicting his demise for months, comparing his fall to the headquarters of Carthage By the Romans.

Others they called him Ponzi scheme.

Kwon seemed to appreciate the criticism. He responded to his doubters by calling them “poor”.

Kwon tried to avoid the attention of the SEC on another terrestrial project that acted as derivatives. He received a subpoena just before taking the stage at a US conference, but later claimed the SEC had no jurisdiction over his project.

About a week before Earth lost its peg to the US dollar, Kwon boasted that it was “fun to see businesses die.”

The Earth (Luna) collapse left many in the cryptocurrency world wondering if it was a Ponzi scheme.

Several South Korean investors who suffered losses following Earth’s sudden collapse last week are planning to sue the co-founder and CEO of Terraform Labs for fraud.

The investors also plan to file an application with the Seoul Southern District Attorney’s Office for seize Kwon’s assets next week.

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