A 40-billion dollar crypto collapse brings Korea against the insane leader

kwon's answer was concise: "Your mother, obvious."

Now the cheeky 30-year-old Korean, who routinely mocks his critics as "poor", is asked to be responsible for the 40-billion dollar collapse of a creation this month, which he once described as "the oldest and most widespread algo", before he was added: " King. "

When the loss increased, South Korean press reports associated the crash with a local increase in online searches to Seouls Mapo Bridge, an alleged suicide place. In response to this, the local police announced reinforced patrols around the bridge.

On Friday, South Korean prosecutors initiated an investigation against Kwon's Terraform Labs after five Korean crypto investors with total damage of 1.4 billion (1.1 million USD) submitted a criminal complaint for fraud and violation of finance.

"Do Kwon was like a successful cult leader," said Donghwan Kim von Blitz Labs, a crypto consulting company based in Seoul. "But now he's the most hated man in Korea."

Kwon visited a foreign language elite high school in Seoul and studied computer science at Stanford University. In 2018 he founded together with Daniel Shin, the prominent founder of the Korean E-Commerce-Inhorn Ticket Monster, Terraform Labs in Singapore.

The couple launched the StableCoin Terrausd in 2020. Terra should keep a constant value of $ 1. Its dollar bond was maintained by an algorithmic relationship with the Luna cryptocurrency. To buy Terra, users need luna and vice versa.

This fluctuation dynamics should keep the Terra price stable, but a run took place in early May. When the Luna supply was sold out, the value of the cryptocurrency fell against zero, undermining the sensitive algorithmic balance of the ecosystem and broke the binding of Terra to the dollar.

The "Luna Foundation Guard", a non-profit organization that supports the Terra ecosystem, failed to mobilize enough bitcoin reserves to ensure the stability of Terra, and the confidence in the model.

"The market capitalization of the coins grew too big too much when their reserves or tools were not yet ready to defend their value," said a narrow former colleague from Kwon. "They started preparing reserves and bought Bitcoin worth $ 3.5 billion, but it was too late."

Individual investors had been attracted to a program in which customers could lend their terra for a return of 20 percent. But hundreds of million dollars of investments in Terraform Labs came from risk capital companies, including Galaxy Digital, whose managing director Mike Novogratz later should buy a luna tattoo on his left shoulder.

"Commitment of some of the most respected funds are proof of the common vision of making decentralized finances available to the masses," said Kwon in July last year.

do Kwons Enger colleague at Terraform Labs had a different explanation: Many investors were "fascinated by his genius".

"Do was able to win many famous investors because there were many people on the cryptom market who approved his philosophy and slogans about the need for decentralized finance and defi token," said the former colleague. "They found the algorithm model fresh and attractive because there was a growing need for stable coins and the coins were in no way connected to the real economy, but only messed up and supported by Bitcoin."

Kwon’s top-class supporters, his global marketing strategy and his sensational social media personality all contributed to attracting attention and small investors, some of which formed into an online army of supporters who were referred to as "lunatics".

skeptics was made short process. "I am not discussing the poor on Twitter, and I'm sorry that I don't have any change for you at the moment," Kwon wrote last year after a British economist had doubts about the algorithmic stable coin model.

"Lunatics believed that his lack of manners was a way to protect their wealth," said Donghwan Kim, "so his arrogance received a lot of support from the community and soon became his trademark."

KWON's former colleague of Terraform Labs identified the decision to offer investors an annual return of 20 percent than the moment when Terra/Luna started "growing too quickly".

"About 14 to 15 trillion Won ($ 11 to $ 12 billion) were paid in just one year after they started offering the 20 percent return," he said. "Individual investors were attracted by the high return, while risk capital was attracted to the rapid growth of the coins. The growth speed was unsustainable."

Another former colleague, ex-engineer of Terraform Labs, Kang Hyung-Suk, said: "Engineers in the company knew the risks associated with the 20 percent yield. They all thought it would not be sustainable because we did not have enough money to support it. But nobody expressed his concern for do, often ignored."

KIM Hyoung-Joong, head of the Cryptocurrency Research Center at Korea University, said: "Kwon asked for a decentralized financing, but he made all the decisions alone. It is ironic that the company's decision-making was so centralized."

The death spiral has requested some top -class victims.

"ARM again", Changpeng Zhao, founder of the Krypto exchange Binance, twice in response to a news report, according to which the value of his investment in Luna had fallen from $ 1.6 billion to less than $ 2,500

hashed, a risk capital company based in Seoul, which was a prominent supporter and sponsor of do Kwon and Terraform Labs, has lost over $ 3.5 billion through the crash.

But the most devastating losses were worn by ordinary small investors.

Ji-Hye, an office worker from South Korea and mother of three children under the age of five, said that she had invested all of her savings in the cryptocurrency after reading and seeing that Daniel Shin was involved in the project.

"I tried my best to accumulate savings, but the bank interest seemed to me much too low during this time. I desperately searched for ways to save more money for my three children," said Ji-Hye, whose name was changed to protect her identity.

"I saw my savings grew with the 20 percent interest rate from day to day, so I borrowed more money from the bank and put more on Terra. It is all my fault that I did not take a closer look before I have invested, but I am despair without my savings."