3 - 5 minute read
South Korean prosecutors have identified more than $314 million of illicit assets related to Terraform Labs co-founder Do Kwon and his associates. However, most of the assets tied to him are unrecoverable since the former CEO reportedly converted most of the stolen funds into Bitcoin using overseas crypto exchanges instead of investing in physical assets.
Kwon faces charges of fraud and embezzlement, among other things, for allegedly causing the collapse of the Terra Luna crypto ecosystem earlier this year. Prosecutors have linked roughly $69 million of the total illicit assets to Kwon.
The authorities have requested Binance to halt any withdrawal request associated with Kwon, and the exchange has confirmed that they are cooperating with the prosecutors. South Korean prosecutors are actively tracing properties associated with Terraform Labs executives in an attempt to recover some of the illicit funds.
This bombshell data, collated by the anonymous researcher @Cycle_22 (who discovered the Hodlnaut insolvency), reveals that TFL suddenly began furiously dumping hundreds of millions of UST only days before the depeg. pic.twitter.com/8r3JvR2IB7— FatMan (@FatManTerra) December 6, 2022
The Terra-Luna Debacle
Terra Luna was a booming crypto ecosystem based on the algorithmic stablecoin Terra-USD classic (USTC). However, the stablecoin depegged in May 2022, leading to the collapse of the $40 billion ecosystem within days. What was initially thought to be a market-triggered event turned out to be a clear case of fraud, with former CEO Kwon at the center of it.
According to on-chain data, Terraform Labs dumped over $450 million of USTC on the open market in the three weeks leading up to the depeg, causing severe market instability. In four days after that, USTC started collapsing. Despite an arrest warrant from South Korean authorities and an Interpol red notice against his name, Kwon continued to evade arrest for almost a year before getting caught on March 23 in Montenegro.
A Warning to Traders
The Terra Luna debacle and Kwon’s subsequent fraud charges should serve as a warning to traders and investors alike to be wary of promising projects and currencies. Before investing in any cryptocurrency, it is essential to conduct thorough research and due diligence on the project and its team. It is wise to avoid investing in a project where there is little known about the team behind it or if there are frequent reports of issues and controversies surrounding its operation.
In conclusion, while Terraform Labs and its Terra Luna ecosystem were once a promising project in the world of cryptocurrency, the recent events have shown that investors must be vigilant in their research and investments. Although the authorities have identified a substantial amount of illicit funds linked to Kwon, most of the assets remain unrecoverable due to being converted into Bitcoin. The recovery of these assets will be a test for South Korean authorities to pursue international criminal finance and introduce new rules and regulations to prevent such cases from happening again in the future.