The multibillion-dollar collapse of Terraform Labs’ stablecoin and the LUNA token is still reverberating through the cryptocurrency industry, and emerging from the wreckage of lost investments and broken blockchain ideas are many questions for Terra’s South Korean founder, Kwon Do-hyung.

Over a matter of days last week, the company’s UST stablecoin started to slip from a peg to the U.S. dollar, before losing its grip entirely and crashing to just cents on the dollar. The sister LUNA cryptocurrency followed to become effectively worthless, with the combined collapse evaporating an estimated market capitalization of US$37 billion, according to CoinGecko. 

Future MBA students may run test-study autopsies of the Terra downfall and what exactly happened — Ponzi scheme? Bad timing? Stablecoins based on code can’t work? Attack by short-sellers? Or simply brought to earth by the vagaries of inflation and a bear market? 

Park Sun-young, professor of economics at Seoul’s Dongguk University, has an even simpler theory: “I believe overconfidence brought the downfall.” 

One question for Terra’s billionaire founder and Stanford University computer science graduate, better known as Do Kwon, is why he shut down the company’s South Korean offices days before the Terra universe cratered?  Was it knowledge of impending doom or just an earlier planned restructuring? 

“Although I cannot confirm the situation, I think it is unlikely that Terraform Labs expected the collapse,” said Park at Dongguk University, who has served on cryptocurrency advisory panels at the country’s National Assembly discussions, but doesn’t personally know Do Kwon.


Answers would be helpful. Documents provided by the Supreme Court of South Korea Internet Registry Office show that Terraform Labs held a shareholders meeting on April 30 and decided to close its two offices in Korea.

This is not the typical behavior of a fast-growing company with designs on becoming a global leader in the exploding cryptocurrency industry. 

However, Cha Dong-joon, a professor of tax accounting at Kyungbok University, said Terra may have closed shop in South Korea for tax reasons. The company had faced an investigation related to alleged tax evasion, Cha said in an interview with Forkast.

“I believe [the closures] are related [to taxation] issues,he said. 

South Korea’s Yonhap News Agency this week reported that Terraform Labs was investigated by South Korea’s National Tax Service for evading taxes and faced a penalty of around 50 billion won (US$39 million).

Yonhap said industry sources provided the information, adding that the National Tax Service declined to comment, citing privacy grounds.

Terra didn’t respond to questions seeking clarification. Do Kwon did not pick up calls to his South Korean mobile phone or answer messages sent to his KakaoTalk app. His physical whereabouts are unclear, though the Terraform Labs headquarters is in Singapore.

South Korean online communities have also asked why Terra’s Busan and Seoul offices pulled down the shutters 10 days before the UST stablecoin began its fall off a cliff.


Elsewhere on social media, there is plenty of angst and anger directed at Terra and Do Kwon, perhaps understandable from individual investors who have lost more than they can afford on Terra investments. 

South Korea’s Financial Services Commission (FSC) chairman Koh Seung-beom revealed earlier this week at the National Assembly that about 280,000 investors hold about 70 billion LUNA in the country alone, while Twitter is filled with stories of distress. 

The moderators of r/terraluna thread on Reddit have pinned the national suicide hotlines of each country on the top for those overwhelmed by losses.

One Twitter post by user Steve Coiner on May 18 read: “Someone really needs to figure out if this was a scam or an attack. I’m not saying that Do Kwon should be punished, but the community should know who is responsible for what happened.”


The anger over the collapse is starting to boil over.  

Seoul police confirmed with Forkast by phone that a man identified only as Kim had turned himself in after gaining illegal entry to the complex where Do Kwon and his wife have an apartment in Seoul’s Seongdong-gu district. 

The man rang the doorbell asking for the Terra CEO and ran off when Kwon’s wife said he wasn’t there. She informed the authorities and was granted police protection.

The man is reportedly a crypto investment streamer on a local online platform AfreecaTV who claims he lost around US$2 million in LUNA. 

The man later told local media when he was released by the police that Kwon Do-hyung needed to make a public appearance, apologize and come up with a recovery plan. 

Groups on Reddit and elsewhere are also gathering signatures and threatening to file class action lawsuits against the founders of Terra-LUNA. 

Yonhap reported that local law firm LKB & Partners is considering filing a complaint on behalf of investors that may include requests for seizure of properties. 

The National Office of Investigation under Korea’s police agency told Forkast on Tuesday that no official complaint has so far been filed against Do Kwon and that it hasn’t started any investigation of Terra.

New plans

Mike Novogratz, founder and CEO of crypto investment firm Galaxy Digital and a Terra investor, said the collapse was akin to a run on a bank and that LUNA was a big idea that failed.

Do Kwon went missing-in-action for a couple days during the financial implosion last week, but then resurfaced with new plans for his project and investors, along with a Twitter hashtag, #TerraismorethanUST.

His “Terra Ecosystem Revival Plan 2,” uploaded to Terra Agora early morning on Tuesday Asia time, hopes to start with a clean slate. 

The Terra Network proposes a so-called hard fork to effectively split the Terra blockchain — the new fork will take the name Terra (LUNA) while the original chain will be named Terra Classic, along with LUNA Classic (LUNC) as its token. 

Do Kwon said the new LUNA will be airdropped to holders of LUNC and UST. 

At the same time, the Luna Foundation Guard is planning to compensate UST users with its remaining assets, with smallest investors getting priority.

This hard fork plan needs to go to a vote by the Terra community, with indications so far that most are skeptical of how it is going to work, and who should be leading it.

“I believe in the builders on terra. There’s some great projects,” wrote one Twitter user with the handle @buy_more_luna. “That being said, if terra wants any chance of success again, Do Kwon needs to step down and let someone else lead. No one gonna trust Kwon anymore after what has happened.”