South Korean entrepreneur Do Kwon, once considered a genius, is now facing multiple criminal charges over his failed cryptocurrency, TerraUSD. TerraUSD was pegged to only a sister currency Luna, using maths and incentive mechanisms to maintain their peg, leading some to call it a Ponzi scheme. Kwon’s company, Terraform Labs, collapsed, wiping out roughly $40 billion of investors’ money and shaking global crypto markets. He was eventually caught trying to flee the country using fake Costa Rican travel documents, and is now facing charges of fraud and other crimes. Kwon’s case highlights the risks of investing in unregulated cryptocurrencies and underscores the need for greater scrutiny and regulation in the industry to prevent future fraud and failures.
South Korean entrepreneur Do Kwon was once hailed as a genius for his work in the cryptocurrency industry. However, his fame disintegrated into global notoriety after his company, Terraform Labs, failed dramatically, wiping out around $40 billion of investors’ money and shaking global crypto markets. Kwon is facing multiple criminal charges over the implosion, including fraud, and was arrested in Montenegro after months on the run, caught trying to board a flight using fake Costa Rican travel documents.
The cryptocurrency he created, an “algorithmic stablecoin” called Terra, was, in reality, a glorified Ponzi scheme, experts say. Despite this, as recently as March 2022, Kwon was being described in glowing South Korean media reports as a “genius,” and thousands of private investors lined up to pour cash into his company.
Kwon attended South Korea’s elite Daewon Foreign Language High School before majoring in computer science at Stanford University in the US. He then interned at Apple and Microsoft before returning to Asia to start his own business. In 2018, he co-founded Terraform Labs with Daniel Shin, who is linked to South Korea’s elite Samsung family through his uncle. The two developed the TerraUSD and Luna currencies, and Kwon quickly rose to fame, partly thanks to Shin’s connections, successfully branding himself as a young industry luminary.
TerraUSD was marketed as a “stablecoin,” a type of cryptocurrency typically pegged to stable assets like the US dollar to prevent drastic price fluctuations. In 2019, Kwon featured on Forbes’ 30 under 30 Asia list, with the magazine stating that his “price-stable cryptocurrency, or stablecoin, attracted 40 million users to work with the company at launch in January 2018.” Forbes also noted that Terra had raised $32 million from crypto-giants such as Binance with the aim of building a blockchain-based payment system.
Cho Dong-keun, an economics professor emeritus at Myongji University, said that “Kwon and his story are a product of our times” and that “he knew how to win the hearts of those who so desperately wanted to make a fortune in one stroke. He also knew how to exploit their anxiety and turn it into massive profits.”
Despite his once-stellar reputation, Kwon’s downfall highlights the risks of investing in unproven, unregulated cryptocurrencies.
South Korean entrepreneur Do Kwon, the founder of Terraform Labs, developed a new cryptocurrency called TerraUSD that experts have criticized as being algorithmic, like a Ponzi scheme, rather than backed by tangible assets like cash or gold. Kwon is facing criminal charges over the failure of Terraform Labs, which wiped out roughly $40 billion of investors’ money and shook global crypto markets. While Kwon had once been described in glowing terms by South Korean media as a “genius,” his reputation has taken a massive hit as a result of the company’s failure. Kwon was eventually caught trying to flee the country using fake Costa Rican travel documents, and is now facing charges of fraud and other crimes.
Many experts have expressed concerns over algorithmic stablecoins like TerraUSD and Luna, which were pegged only to each other using mathematical formulas and incentives. Christian Catalini, founder of MIT’s Cryptoeconomics Lab, called TerraUSD a “death spiral” waiting to happen, and emphasized the importance of a full investigation into Kwon and Terraform Labs to improve the crypto industry and prevent fraud and financial crime.
Kwon has been compared to convicted American fraudster Elizabeth Holmes, the disgraced founder of the medical technology startup Theranos. Both attended Stanford University, and Kwon’s “cockiness” and refusal to face authorities has been likened to Holmes’ behavior. Professor Cho at Myongji University said a responsible adult and entrepreneur would have stayed and explained the situation, rather than fleeing the country and using forged passports.
Kwon’s case highlights the risks of investing in unregulated cryptocurrencies and underscores the need for greater scrutiny and regulation in the industry to prevent future fraud and failures.
Don’t miss interesting posts on Famousbio
