Terra’s Do Kwon allegedly manipulated trading volumes, facing SEC scrutiny amid Terra’s collapse and potential extradition challenges.
In a shocking revelation, U.S. Securities and Exchange Commission (SEC) court documents have uncovered that Terra’s Do Kwon had manipulated trading volumes. These documents, filed on September 22, highlight a text exchange between Do Kwon and Daniel Chin, founder of the payments app Chai. In this conversation, Kwon hints at creating false transactions that would give the illusion of realness and even generate fees.
When Daniel Chin questioned the potential exposure of these fake transactions, Kwon’s reply was seemingly nonchalant, suggesting a mutual silence on the issue. This revelation brings significant implications, given the partnership between Terra and Chai that aimed to revolutionize payments.
SEC Scrutinizes Partnership between Terra and Chai
The previous year witnessed the downfall of Terra, and now, the SEC is pointing fingers at Do Kwon for potential fraud. What adds a layer of complexity to this narrative is the historical tie-up between Chai and Terra. Daniel Shin, who founded Chai, also played a pivotal role in establishing Terraform with Kwon in 2018. The ambitious partnership between Terra and Chai got official recognition in 2019. They announced plans to reconstruct the payments structure using blockchain technology. Their vision was to streamline legacy payment systems and provide more affordable transaction fees for merchants.
Their lofty claims included handling transactions in the range of millions or even billions. However, the SEC has a different story to tell. According to their complaint, Chai’s payment systems weren’t replaced by Terra’s as previously marketed. Instead, Chai continued processing payments traditionally while falsely showcasing them as happening on the Terraform blockchain.
The recent SEC filing goes a step further by unveiling more details about Terraform’s association with Chai. It points out that during Chai and Terraform’s initial partnership phase, Kwon elaborated on his strategy of leveraging Chai for fabricating transactions on the Terra blockchain. These transactions, though fake, would look genuine and even incur fees.
Collapse of a Crypto Giant: The Downfall of Terra
At its peak, Do Kwon’s Terra was a force to be reckoned with in the crypto domain. With a primary focus on algorithmic stablecoins, this expansive crypto ecosystem boasted an array of apps. It stood as the second-largest DeFi blockchain, surpassed only by Ethereum. Furthermore, LUNA, Terra’s native cryptocurrency, enjoyed a prime spot among the top digital assets in terms of market capitalization.
However, the crypto realm is no stranger to volatility. May 2022 saw Terra crumble, setting off a severe bear market. This collapse had a domino effect, pushing numerous crypto projects that had links with Terra towards bankruptcy. The crypto community was abuzz with speculations and predictions, with experts trying to make sense of this downfall.
In the aftermath, Do Kwon faced multiple charges from both American and South Korean officials. His alleged wrongdoings caught up with him in Montenegro, where authorities arrested him for document forgery. Following his conviction, Montenegro’s court detained Kwon indefinitely. Currently, he’s challenging his potential extradition to the U.S., marking another chapter in this ongoing saga.