The Terra ecosystem was doomed to collapse at some point because of its underlying mode, Tether CTO Paolo Ardoino believes.
Terra’s creation was set to fail, Tether’s CTO says
The Tether executive in a recent interview theorized that Terra was set in a way leading to failure. Tether manages the largest stablecoin project, USDT, which boasts a $72.42 billion market capital, ranking only behind Ethereum and Bitcoin in the broader crypto space. Unlike TerraUSD (UST), the USDT has the US dollar as its backing asset.
UST, Terra’s failed stablecoin project, was backed by the ecosystem native token now LUNC, which itself exhibits volatility just like other crypto assets.
“These guys were creating two things, one their own cryptocurrency called [LUNC], and a stablecoin on top of that cryptocurrency,” Ardoino remarked. “That is a recipe for disaster.”
Certainly the case, TerraUSD lost its depeg last month as its collateral asset, LUNC, plunged in the market. Scrutiny around Terra, its founder Do Kwon, its staff and other associated parties has since increased as authorities and regulators probe for malfeasance.
Do Kwon refutes claims that he took funds from Terra for personal use
Terra founder Do Kwon has come out to clear his name following allegations, tabled by FatManTerra on Friday, suggesting that he and other influencers took up to $2.7 billion from the ecosystem prior to its collapse. FatManTerra wrote on Twitter that Kwon and his ‘accomplices’ withdrew $80 million each month for almost three years while altering the liquidity to reflect no malice.
The revelation drew mixed reactions from the Terra community – some believe that the Terra founder misled investors and thus needs to be charged in court. Others disagree with this take, saying that the Terraform Labs CEO didn’t commit anything that constitutes a criminal offense. The latter faction argues that investors willingly put their funds into Terra and is more like a case of gambling at the casino.
Kwon responded to the allegation in a Twitter thread posted today, dismissing them as false.
“This should be obvious, but the claim that I cashed out $2.7B from anything is categorically false […] To reiterate, for the last two years the only thing I’ve earned is a nominal cash salary from TFL, and deferred taking most of my founder’s tokens because a) didn’t need it and b) didn’t want to cause unnecessary finger pointing of ‘he has too much’,” he wrote.
Separate allegations made by an Anchor Protocol developer claim that Kwon ignored a request to lower interest rates despite warnings that the 20% rate offered was unsustainable. A South Korean news outlet reported last month that the Terra co-founder had been asked to appear before the parliament as part of the investigation into what happened.
Court of Appeal rejects Terraform Labs and Do Kwon’s plea to ignore SEC subpoena
The demise of Terra last month goes down as one of, if not, the biggest crypto collapse in history – nearly $40 billion of investor money being washed away. The fallout has not only put the founders of the ecosystem in the spotlight but also brought multiple probes within jurisdictions to establish the reasons for failure within their system.
SEC subpoena ties Kwon’s creation to unregistered securities
The US Securities Exchange Commission (SEC) is applying pressure on Terraform and its co-founder Do Kwon and recently issued a subpoena in a claim that Kwon ‘approved’ Mirror Protocol offering, which enables users to trade in digital assets that track the price of major US stocks.
Kwon contested the subpoena’s validity in February but lost, with the Second Circuit court finding the SEC to have followed its rules on serving the subpoena. In the ruling, the court established that Kwon and Terraform Labs had sufficient ties to the offering in the US market. It also affirmed that the SEC had jurisdiction in the matter since Terra has employees based in the country, not to mention that nearly 15% of the Mirror Protocol users were Americans.
Kwon to face legal charges in the US
The Second court ruling for Kwon to face legal charges in the US despite being South Korean means Kwon must cooperate with the Securities Commission. Regardless of Terra’s blockchain ecosystem being registered in Singapore, where Kwon lives, the court finds sufficient ground for the SEC to pursue Kwon and Terraform Labs as they service US residents.
Earlier, Kwon had only maintained contact with the SEC through his lawyers but disputed the manner in which he was served. Citing the commission’s failure to keep the investigation confidential, Kwon claimed that the server, Cavalier Courier and Process Service, purposed to intimidate and embarrass him, an act he considered reckless.
The post Terra Roundup: Do Kwon Disputes Claims He Took Funds from Terra, Appeal Court Rules Against Do Kwon, and more appeared first on Securities.io.
