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Luna Cryptocurrency News: Do Kwon Charged Again

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Recent Luna cryptocurrency news has seen Do Hyeong Kwon, the former Chief Executive Officer (CEO) of Terraform Labs, charged by the US Securities and Exchange Commission (SEC). Announcing the charge in mid-February, the agency described it as one of the biggest multi-billion dollar digital currency securities fraud in recent times.

Luna cryptocurrency news: Firm sold suite of crypto asset securities

From April 2018 to May 2022, when the algorithmic stablecoin TerraUSD (UST) collapsed and wiped billions of dollars off the market, the SEC believes the Singapore-based company and its CEO offered and sold a range of connected suite of crypto asset securities which raised billions for the various stakeholders involved.

According to the SEC, many of these activities went on through unregistered transactions.

One of the areas that brought the agency’s raid on Terraform Labs was its association with the production of above-average annual percentage yields (APYs). While interest rates from traditional financial institutions have been ranging from 0% to 3%, the introduction of blockchain technology which has given birth to decentralized finance (DeFi) and decentralized applications (DApps), has created a new window of opportunity where investors can earn more.

Although most projects remain cautious about not misleading investors by setting up APYs of 5% to 15%, Terra promoted its stablecoin as a high-yield crypto asset with an APY of 20%. 

The founder persistently told investors that the UST will continue to maintain its peg against the US dollar (USD) and its native asset in the form of LUNA will continue to increase in value.

Commenting on the development, SEC Chair Gary Gensler, who has consistently fired at the fact that most of the cryptocurrencies on the market are securities, said that Do Kwon and his organization committed fraud because they found ways and means to repeat false and misleading statements to lock investors in on their illegal activities.

Gensler added that while most crypto companies will go length and breadth to avoid complying with rules and regulations, the fresh charges demonstrate the regulators' commitment to protecting the hard-earned money of public servants. 

Luna cryptocurrency news: Do Kwon charged by South Korean authorities

In September 2022, four months after the crash of UST led to the greatest sale in the history of the crypto market, the International Criminal Police Organization (Interpol) issued a red notice for the CEO. 

This came about after prosecutors in his native country of South Korea requested the 194-member country organization to pursue the crypto boss. 

In October 2022, with pressure from investors mounting and South Korea receiving negative buzz in the crypto market, authorities told Kwon to abdicate his passport or face consequences in the form of a revocation.

Responding to the international arrest warrant on his head, Kwon said that the charges against him were unfounded and he believed they were politically motivated.

In December 2022, South Korean authorities reported that it had come to their notice that he was hiding in Serbia after leaving Singapore a few months earlier. 

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Effect of Terra Luna's collapse on the crypto market

Although it would be understandable for newbies to the crypto market to downplay the impact of LUNA's collapse on the decentralized finance economy, the statistics say otherwise.

On 1 May, 2022, the crypto market had a market capitalization of approximately $1.68 trillion. Within 12 days of the beginning of the end of TerraUSD (UST), the stablecoin began de-pegging from the USD. This also led to large selling by LUNA holders, ultimately resulting in a plunge in the coin's price from $78.32 on 1 May to $0.004173 by the close of 12 May. 

The resultant effect of this was a 35% tank in the overall market value of the crypto sector to $1.088 trillion on the same day. Simply put, in plain mathematics, around $588 billion was wiped off the market in about two weeks.

What followed was an extensive disinterest in a market that had brought multiple percentage gains to investors in 2021. The consistent selling activities saw about $756 billion as the overall market value of the crypto economy on 31 December, 2022.

In just seven months, 54% of the market was lost due to Terraform Labs. As a result, investors withdrew $920 billion from the blockchain-powered sector.

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UST's collapse destroyed decentralized finance and TVL

The only way the blockchain-powered economy could contest the centralized finance economy was to offer something different. That is how DeFi and total value locked (TVL) came into being.

With decentralized lending, exchange, insurance, and yield aggregation leading to the creation of new DApps, millions of investors locked liquidity into pools to consistently earn passive income.

Terra was one of the most vibrant projects and commanded more than $20 billion in value locked. At one point, it trailed only Ethereum in the ranks of projects with the most liquidity in DApps.

By the end of 2022, the project once touted as a threat to Vitalik Buterin and Ethereum's dominance in the smart contracts section of the blockchain world, had a TVL of around $32 million. 

For a project that once surpassed Binance Smart Chain, Avalanche, and Solana, Do Kwon’s innovation has now fallen behind Oasis, Stacks, Hedera, Gnosis, EOS, and Waves.

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Future Luna cryptocurrency news

Do Kwon remains at large, but only time will tell if he can outpace authorities. In March 2023, Terra TVL fell below its closing in 2022. Its cryptocurrencies, in the form of Terra Luna Classic (LUNC) and Terra LUNA, continue to trade below $5 by seeing consistent below-average trading volumes it was not accustomed to during its glory days between April 2018 and May 2022.

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Author: Raphael Minter

Raphael Minter/ Albert Zuhnden (preferred pen name) is a crypto finance writer, data miner, and fundamental analyst. Raphael has written hundreds of articles about centralized and decentralized financial instruments such as precious metals, commodities, stocks, and cryptocurrencies. He broke into digital finance in 2016 and believes digital assets and blockchain technology is the future of finance.

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