Terra CEO Do Kwon Unlikely to Face Jail Time for LUNA’s Collapse
The South Korean Terraforms Lab and LUNA CEO, Do Kwon, might not be facing prison time as fraud charges against him can’t be proven, but the chances of being fined are higher.
The following behind the 30-year-old founder is cult-like. Do Kwon has presented himself to the crypto sector as a charismatic individual with a touch of the anonymous Satoshi Nakamoto and the boisterous Tesla CEO, Elon Musk, making him an extraordinary marketer of his ideas.
However, in the previous month of May, his personality has not held up amidst the crash of the Terra ecosystem following the de-pegging of its algorithmic stablecoin UST, and now, both tokens are essentially worthless. The failure was so massive that it literally dragged down the entire crypto asset, erasing half a trillion dollars from the sector’s market cap. This incident not only hurt retail investors who saw great losses but also affected and increased investors’ skepticism of the whole space and attracted government regulations.
Further investigations showed that Kwon had tried creating an algo stablecoin before UST inception. However, his first effort saw losses in the tens of millions of dollars compared to tens of billions lost in LUNA.
Despite the current situation, Kwon pitched his vision of a new and innovative payment system that would change the current state of affairs and replace the world’s currencies. Many top investors and venture capitalists continue backing him in his new project, LUNA 2.0 and Terra Classic (LUNC). Few of his top Terraform supporters include Unicorns Lightspeed Venture Partners and Coinbase Ventures. Three Arrows Capital and Jump Crypto also bought into the Luna token. Crypto firms like Binance and FTX publicly backed Kwon’s plan to relaunch and relist the Luna token.
On Tuesday, May 31st, Binance listed Luna 2.0. The price increased by more than 90% at first but is currently down by more than 50% from the highs.
The Legal Actions Against Terra Network and Do Kwon
According to legal laws, Do Kwon didn’t commit any explicit offense other than being shortsighted and oblivious to the shortcomings of his coin model. Before Do Kwon can be penalized for any fraud crimes, prosecutors would have to prove that he was undoubtedly guilty of all leveled charges. That means that the defendant has to prove that he intended to dwindle and deceive investors.
In a recent interview with CNBC, Randall Eliason, a Former assistant Columbia District U.S. attorney, explained that
It’s not like a homicide where you bring witnesses to testify to who pulled the trigger.Randall Eliason
He claimed that for prosecutors to build cases of this nature, they look for little nuggets of information and communications against lower-level participants and then persuade them to cooperate and testify in court.
Also, a former federal prosecutor and trial attorney representing clients in derivative-related claims and securities class actions, Renato Marotti, further corroborated that prosecutors have to convince the jury of Kwon’s intentions behind the currency’s failure also shows that his actions were undeniably deliberate.
Because we don’t have a magic telescope to read a person’s mind, prosecutors often rely on emails, texts, tweets, and other statements.Renato Marotti
However, while Do Kwon’s case might be regarded as not punishable enough, other crypto founders were not fortunate. In September of 2021, Stefan Qin, the founder of Virgil Sigma Fund—a cryptocurrency hedge fund, was sentenced to more than seven years in imprisonment for securities fraud and falsification of documents. A Swedish founder, Roger Nils-Jonas Karlsson, was found guilty of crypto and securities fraud of about $16 million, money laundering, and wire fraud. Most of his assets were confiscated by the American government, including his resort house in Thailand.
Moreover, it has been stated that though he might not be put behind bars, he’d be greatly fined for his actions. The capital of his based Terraform Lab, Seoul’s Government tax agency, has requested that he pay $80 million (100 billion Won) for taxes he owed from the prior years.
According to domestic media, some investors have alliances in South Korea and filed a complaint against Kwon and Terraform’s former co-founder Daniel Shin on counts of fraud. However, no official statement has been released to the press about the legalities of the issue.