The US Securities and Exchange Commission (SEC) discovered that Terra founder Do Kwon laundered $100 million worth of Bitcoin after the implosion of the protocol. It concerns 10,000 Bitcoin that belonged to the reserves of Terraform Labs. After the collapse of the protocol, he sent them from the Luna Foundation Guard to a cold wallet, and then converted the Bitcoin into fiat money through a Swiss bank account.
Not the only thing
That’s not the only thing the SEC has found, though. In addition to the $100 million worth of Bitcoin, they also discovered that Do Kwon and Terra were trying to artificially bail out the TerraUSD. In May 2022, the Terra protocol began to falter and the TerraUSD stablecoin lost its peg to the US dollar.
In an effort to prevent the protocol from collapsing completely, Do Kwon and Terraform Labs tried to convince third parties to buy “massive amounts” of TerraUSD. We now know that this was not enough to save the day, but it does indicate the extent to which they, too, were desperate.
In addition, the SEC claims that several tokens linked to Terra’s collapse qualified as securities. Among these tokens, it ranks TerraUSD, Luna, Wrapped Luna, and the tokens developed on Terra’s Mirror Protocol, among others.
Large-scale fraud
The SEC’s indictment also targets Chai, a business partner of Terraform Labs. Chai is a South Korean payment application that, according to the partnership, would use Terra’s blockchain to process payments. In reality, however, that was not the case at all and they simply published transactions on Terra’s blockchain that had already taken place in the real world.
What exactly this means for investors is currently unclear. It seems unlikely that they will ever see any of the lost funds again. On the other hand, there is the $100 million in fiat money in the Swiss account, of which there is no doubt some left. Perhaps something can be done with that to compensate investors.
