Terra Co-Founders Face Lawsuit from Korean UST and LUNA Investors
Do Kwon is being charged with both fraud and illegal fundraising and may be forced to forfeit his property.
In the aftermath of Terra’s collapse, co-founder Do Kwon now faces legal pressure from affected Korean investors. They’ve filed both criminal and civil lawsuits, alongside an order to seize Kwon’s assets.
Trouble With the Law
According to the Korean news outlet Munhwa, investors in both UST and LUNA filed with the court to seize Kwon’s property this week, while also suing for fraud. They’ll be represented by the legal firm RKB & Partners, from which 6 lawyers are already reviewing a complaint against the CEO.
“There are related investors inside the law firm, and we plan to file a complaint against CEO Kwon at the Financial Investigation Unit of the Seoul Metropolitan Police Agency,” said Kim Hyeon-kwon, a partner at LKB & Partners.
Kwon became a target of the crypto industry’s ire after the UST stablecoin lost its peg to the dollar. Its stabilization mechanism also caused Terra’s governance token LUNA to undergo hyperinflation, reducing its value to virtually zero. Many large investors in the protocol – such as the UK Youtuber KSI – watched their multi-million dollar LUNA positions crumble to nothing in the aftermath.
As a result, Kwon may be summoned to appear before the South Korean government to testify on each cryptocurrency’s collapse. The national politician Yun Chang-Hyun has requested that Kwon and other executives of local crypto exchanges explain their actions while the de-peg was taking place.
That’s not all. Next week, a new Korean group called “Victims of Luna, UST coins” will file a lawsuit against both co-founder Do Kwon and Shin Hyun-Seong for fraud and illegal fundraising. Over 1500 people are members of the group.
Neither lawsuit has reached court yet, but likely will soon.
The Vote to Recreate Terra
Do Kwon put forth a proposal on Monday suggesting that the Terra network fork from its current chain, and start again with a different cryptocurrency. As of Wednesday, the vote has gone live.
About 20% of the votes are in so far, with 90% of respondents voting “yes”. Should it take place, the old devalued LUNA tokens will become “LUNC” (aka LUNA Classic) and the new LUNA supply will start at 1 billion tokens.
Not everyone is satisfied with the idea, however. Binance CEO Changpeng Zhao stated on Saturday that forking the chain “won’t work”.
“Forking does not give the new fork any value,” he said. “That’s wishful thinking.”