국문 KR 영문 EN

Host: Choo Hye-jung
Guest: Pureun “Ian” Hong, managing partner at Decent Law Firm
 

Q. Who is Do-hyung Kwon, the key figure in the Terra-Luna incident?

• CEO of Terraform Labs, Do-hyung Kwon's background: ‣ Graduated from Daewon Foreign Language High School
  ‣ Graduated from Stanford University with a degree in Computer Science
  ‣ Worked as an intern at Apple and Microsoft
  ‣ Founded a fintech startup
• Key figure in the Terra-Luna collapse
• CEO Do-hyung Kwon arrested after one year on the run
• The U.S. SEC charged him with securities fraud under the Securities Exchange Act
   

Q. What is the Luna collapse, considered one of the largest crypto crashes?

• Luna, an algorithmic stablecoin

Q. What is a stablecoin?

• A stablecoin is pegged to the value of the U.S. dollar
• Types of stablecoins: ① Fiat-backed
  ② Crypto-backed
  ③ Algorithm-based
   

Q. What caused the Luna collapse?

• The Terra (UST) algorithmic stablecoin
• $51 billion evaporated in just 72 hours
   

Q. Why did Luna and Terra crash?

• The promise that "Terra's price will always be $1" was broken
• The 1:1 peg between 1 Terra and $1 collapsed
• The loss of dollar-pegged stability impacted the entire crypto market
• Anchor Protocol allowed for DeFi with 19% annual interest on deposits
   

Q. Was the Luna-Terra crash caused by a loss of investor trust?

• Terra conducted 'pre-mining' worth ₩1.5 trillion, which was not mentioned in the white paper
• Although not disclosed in the white paper, some institutional investors "knew about it"
• Terra claimed, "We explained it multiple times in chat rooms... no issues with transparency"
• Luna-Terra crashed, losing 99.3% of its value from its all-time high (a 150-fold drop)
   

Q. What is the current status of Luna-Terra?

• Luna and Terra have lost their value, resulting in global investor losses
• The first case investigated by the Financial and Securities Crimes Joint Investigation Unit is the 'Luna-Terra' case
   

Q. Is Luna-Terra a Ponzi scheme?

• Ponzi scheme: Using new investors' funds to pay returns to earlier investors
• Remaining funds are used to attract more new investors, making it a fraud
   

Q. Was the structure of Luna-Terra a Ponzi scheme?

• High 19% interest paid through Anchor Protocol → suspected Ponzi scheme
• "No legitimate profit structure was in place"
   

Q. Were issues with Luna-Terra raised at the time?

• Terra's pre-mining of ₩1.5 trillion, not mentioned in the white paper
• Although not disclosed in the white paper, some institutional investors "knew about it"
• Terra claimed, "We explained it multiple times in chat rooms... no problem"
   

Q. Has there been an increase in cryptocurrency-related crimes? How to identify fraudulent coins?

• "It’s not easy to uncover crypto fraud"
• "Checking the coin’s white paper, operators, technical capabilities, and future profitability is essential"
   

Q. What are the characteristics of crypto fraud victims?

• "Most crypto fraud victims are elderly"
• "They are often deceived by brokers and invest large sums, resulting in losses"
   

Q. What are the legal standards for punishment in cases of crypto fraud in Korea?

• It falls under 'fraud' under the criminal law and violation of the 'Act on the Regulation of Conducting Fund-Raising Business without Permission'
• Korea has no precedent of punishing capital market law violations related to cryptocurrencies
• The first case involving cryptocurrency is being closely watched by the Financial and Securities Crimes Joint Investigation Unit
   

Q. Are there any examples of punishment for crypto fraud?

• The 'V Global' case, where 50,000 victims lost ₩2 trillion, was charged with fraud
• They used a pyramid scheme to recruit members by promising to triple their investment
• In cases of pyramid schemes, it is necessary to check for approval from the Fair Trade Commission
   

Q. Will Do-hyung Kwon be extradited to Korea?

• Do-hyung Kwon was captured in Montenegro
• Prosecutors have dispatched investigators and are on standby
• The first CEO of Terraform Labs, who is a co-conspirator, is more likely to be extradited than Do-hyung Kwon
   

Q. What are the charges against Shin Hyun-seong, the 'second-in-command' of Terra-Luna?

• He faces multiple charges, including fraud, breach of trust, and violations of the Electronic Financial Transactions Act
   

Q. What are the key charges?

• The Terra-Luna incident is a global issue
• "Violations of the Capital Markets Act and charges of fraud are being highlighted"
   

Q. What will happen to Do-hyung Kwon after his arrest overseas?

• Do-hyung Kwon is detained in Montenegro on charges of document forgery... both South Korea and the U.S. have filed indictments
   

Q. Which country’s court will Do-hyung Kwon face?

• The prosecutor from the District Prosecutor's Office in Montenegro said, "Forgery of passports is the first charge"
   

Q. What is the investigation status in other countries regarding Do-hyung Kwon?

• Securing custody of Do-hyung Kwon is not easy
• Do-hyung Kwon may engage in legal battles locally for years, resisting extradition
• U.S. prosecutors have filed 8 charges against Do-hyung Kwon and reported it to the White House and Congress
   

Q. What will the direction of the investigation be if Do-hyung Kwon is extradited to Korea?

• "The focus will be on violations of the Capital Markets Act"
• "There is a need for legal definitions concerning cryptocurrency and its operators"