Key Takeaways
- Including to prison complaints from a bunch of South Korean buyers, prosecutors are reportedly investigating Terraform Labs CEO Do Kwon on Ponzi fees.
- The prosecutors are scrutinizing whether or not Terraform Labs’ Anchor Protocol, which promised buyers mounted 20% curiosity on UST deposits, was a Ponzi scheme.
- The investigation follows Terra’s $40 billion collapse final week.
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South Korean prosecutors are reportedly weighing whether or not they may cost Do Kwon for working a Ponzi scheme by promising unsustainably excessive mounted rates of interest on UST deposits by way of Anchor Protocol.
Prosecutors Investigating Do Kwon on Ponzi Costs
Do Kwon may very well be criminally charged for working a Ponzi scheme, South Korean information sources have reported.
Based on a Friday report from Yonhap, South Korean prosecutors are actively investigating whether or not they may make further Ponzi scheme fees in opposition to Terraform Labs CEO Do Kwon, including to the complaints already filed in opposition to the entrepreneur over Terra’s dramatic implosion. A Ponzi scheme is a kind of funding fraud during which early buyers revenue from cash gathered from new buyers.
As Crypto Briefing reported, a bunch of South Korean buyers filed a prison criticism in opposition to Kwon and his co-founder Daniel Shin for fraud and different monetary violations Thursday over Terra’s collapse. Per the newest report from Yonhap, the Seoul Southern District Prosecutors Workplace in command of the case has reportedly assigned its Monetary and Securities Crime Joint Investigation Crew, dubbed the “Angels of Loss of life,” to analyze whether or not Kwon was working a Ponzi scheme by selling unsustainably steady yields on UST deposits by way of Anchor Protocol.
At present, Kim Hyun-Kwon, a companion at LKB & Companions, a high South Korean regulation agency representing the buyers suing Kwon, told Yonhap that Anchor protocol was “unsustainable” and may very well be deemed a Ponzi scheme. “After reviewing the related legal guidelines, we’ve judged that the [Anchor] protocol may be established as a Ponzi scheme,” he stated. “Whereas there could also be no authorized clause on stablecoins and bitcoins, there’s a judicial precedent we imagine may be utilized to this case.”
Yonhap additionally reported that an official from the prosecutors’ workplace stated that “Kwon’s remarks promising returns may present a key clue” for the case.
Anchor Protocol is a Terra-native decentralized utility constructed by Terraform Labs that sought to offer a hard and fast 20% rate of interest on UST deposits. It was designed to attain this by diverting the yield from the interest-bearing collateral posted by debtors towards the UST depositors or lenders.
Nevertheless, when the hype across the crypto market started settling in late 2021 and cryptocurrency costs began trending decrease, Anchor’s mounted 20% curiosity grew to become unsustainable. As a substitute of decreasing the protocol’s yield price, Terraform Labs saved the speed excessive by propping up Anchor’s UST reserves with $450 million from its personal treasury—cash that prosecutors may argue got here not directly from LUNA buyers.
Based on native studies, Kwon has already left and moved most of his liquid belongings out of South Korea.
Disclaimer: On the time of writing, the creator of this piece owned ETH and several other different cryptocurrencies.
