Content of the article:
The collapse of the #Terra ecosystem in 2022 shocked the crypto market and may have affected over 1 million victims, according to new court documents. Although it did not attract as much attention as the collapse of FTX, the number of potential victims in the case involving Do Kwon, the founder of Terraform Labs, is 'impossible to quantify accurately,' according to allegations from authorities.
Consequences of the Terra collapse
Terra was a once-popular blockchain ecosystem, with token $LUNA and stablecoin TerraUSD (UST) as its flagship products. Investors used this ecosystem as a gateway into the world of decentralized finance (DeFi). However, in 2022, UST lost its ability to maintain a fixed exchange rate with the USD, leading to the collapse of the entire ecosystem in a short time. The incident wiped out $40 billion in market capitalization, leaving many investors with significant losses.
According to documents submitted to the court on Monday, U.S. authorities estimate the number of victims in the case 'exceeds hundreds of thousands of individuals and organizations and could be over 1 million.'
Fraud charges against Do Kwon
Do Kwon currently faces 9 criminal charges in the U.S., including securities fraud, electronic fraud, commodity fraud, and conspiracy to commit money laundering. Authorities believe that Terraform Labs intentionally created the illusion of an efficiently functioning decentralized financial system to attract investors. 'Behind the scenes, Terraform's core products did not operate as Kwon advertised and were manipulated to deceive investors,' according to allegations from the U.S. government.
In addition, Kwon is also facing criminal charges in South Korea, where he has been wanted since the collapse of Terra.
Comparison with FTX
The collapse of Terra occurred just before the #FTX exchange declared bankruptcy at the end of 2022. Both incidents left serious consequences, shaking confidence in the crypto industry. While Sam Bankman-Fried, co-founder of FTX, received a 25-year prison sentence for his role in the FTX collapse, charges against Do Kwon are still being adjudicated in the U.S.
⚠ Risk warning:
The cryptocurrency market always carries significant risks. Investors need to be cautious and thoroughly research information before participating to avoid unnecessary losses.