Do Kwon's trail-blazing DeFi career likely to end up in imprisonment. The post Do Kwon Could Face 40 Years in Prison if Extradited to South Korea: Report appeared first on Tokenist.
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Recap of the Terra Downfall
When Terra crashed in May 2022, it was trending to be one of the top blockchain networks behind Ethereum. Much of its popularity came from the novel dynamic between Terra (LUNA), the network’s native cryptocurrency, and TerraUSD (UST) stablecoin.
The latter was algorithmically pegged to LUNA, wherein smart contracts constantly readjusted the supply of UST/LUNA depending on the demand for both. For instance, if the price of LUNA went up, the algorithm would reduce UST supply with a buyback of UST with LUNA. Therefore, decreasing the price of UST so the peg to the dollar would be stabilized.
As this concept eliminated the reliance on traditional banks as stablecoin reserve custodians, it seemed to push the DeFi envelope of innovation. Moreover, Terra’s lending protocol Anchor contributed hugely to attracting investors, as it offered up to 20% yields for UST deposits.
From ‘Honest Mistake’ to Suspected Malfeasance
After Terra’s crash in May 2022 took authorities three months to begin viewing the founder, Do Kwon, as a criminal. Before that, Terra’s meltdown was primarily seen as a failed experiment. On September 26, 2022, Interpol issued a ‘red notice’ for Do Kwon, the South Korean co-founder of Terraform Labs.
Following the South Korean arrest warrant for fraud and breach of capital market laws, the’ red notice’ alerted law enforcement agencies worldwide to apprehend him. This was when the incongruity of Kwon’s statements began to kick in fully.
Is Extradition to South Korea Imminent?
- Fraudulent scheme to mislead investors.
- Painting UST as stable while secretly colluding with a third party to buy massive amounts of UST to restore the peg a year before the crash happened in May 2021.
- They were selling unregistered securities and security-based swaps.
“Given the nature of this incident, we think investigating the case in South Korea would be the most efficient way of bringing justice”
After all, Kwon’s other associates and collected evidence are already in South Korea. If the prosecution successfully delivers the extradition and the case, Do Kwon could receive up to 40 years.
This would be in line with another convicted fraudster, Kim Jae-Hyun, the CEO of Optimus Asset Management. He was sentenced to 40 years for investment fraud in July 2022.
Do you think Do Kwon had honest intentions initially, which fouled later? Let us know in the comments below.