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UST creator Do Kwon was running a Ponzi? Prosecutors Investigate

20 May 2022 : 15:33
2 min read
  • A group of 5 South Korean investors filed a lawsuit against Do Kwon
  • Following the lawsuit, the prosecutors are wondering if they should charge Kwon for running a Ponzi
  • Prosecutors believe that Anchor Protocol was in fact a Ponzi

Following the multi-billion crash of the LUNA-UST model, the creator of Terra, Do Kwon, has received heat from regulatory authorities. South Korean investors have filed a lawsuit against him while an investor even tried to break into his house where his wife was present. People have lost millions, and so prosecutors are wondering if they need to charge Kwon for running a Ponzi.

Do Kwon pushed a Ponzi down our throats?

According to a Friday report from Yonhap, a day after angry investors sued the CEO Do Kwon of Terraform Labs, the prosecutors of the case are looking into whether to bring Ponzi fraud charges against Kwon. As Cryptonary, LUNA, and Terra USD, UST, continued to crash in the last few days after a number of failed attempts to save the Terra ecosystem. 

As per Yonhap, financial authorities have disclosed that over 280,000 investors believed to be holding about 70 billion Luna coins had lost their money following the crash of the project. In the light of the crash, five South Korean investors filed a lawsuit against Do Kwon and co-founder Daniel Shin claiming that they had lost around 1.4 billion won (US$1.1 million) due to the LUNA-UST crash. 

Prosecutors are investigating the case and wondering if Do Kwon was pushing a Ponzi scheme down investors’ throats in the form of Anchor Protocol, a DeFi lending and borrowing protocol that promised 20% yields to investors for their UST deposits. 

“Kwon’s remarks promising returns could provide a key clue,” a prosecution official said.

Revival Plan

As noted by Cryptonary, Do Kwon has proposed a plan called the ‘Terra Ecosystem Revival Plan 2‘ to help investors get their money back and enable Terra to get back to its feet once again. The current Terra chain will be forked into a new chain without algorithmic stablecoins called ‘Terra,’ while the old chain will be called Terra Classic. There has been a mixed response from the community about the same, with people asking Kwon to burn trillions of LUNA tokens.

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