SEOUL: The co-founder of the failed Terra cryptocurrency, which collapsed and wiped out about US$40 billion of investors’ money in May, has admitted he was “wrong”, but said that he was not talking to South Korean investigators.
The dramatic disintegration of stablecoin TerraUSD and its sister token Luna – which both dropped to nearly zero in value – hit the wider crypto market, sparking more than US$500 billion in losses.
Stablecoins are designed to have a relatively stable price and are usually pegged to a real-world commodity or currency.
Many retail investors lost their life savings when Luna and Terra entered a “death spiral” and collapsed, and South Korean authorities have opened multiple criminal probes into the crash.
In his first public comments since, Do Kwon, the 31-year-old South Korean founder of Terraform Labs, spoke to crypto media start-up Coinage from Singapore, saying the collapse had been “brutal”.
“I think in terms of healing wounds, the best that I can do is to just be upfront with everything that happened. You know, just admit that I was wrong,” Kwon said.
South Korean prosecutors last month raided the home of Do Kwon’s co-founder Daniel Shin as part of a probe into allegations of illegal activity behind Terra’s collapse.
Authorities have also banned key former and current employees of Terraform Labs from leaving the country – and have required Kwon to notify them when he returns.
But Kwon said in his interview that he had not been contacted by the prosecutors, and has not decided whether he would return to South Korea to cooperate.
“It’s kind of hard to make that decision, because we’ve never been in touch with the investigators,” he said, adding: “They’ve never charged us with anything.”
Do Kwon and Terra are a cautionary tale for the crypto market.
TerraUSD was once the fourth-largest stablecoin and the 10th-largest cryptocurrency by market value, according to CoinMarketCap.
Unlike other stablecoins backed by real world assets like cash, TerraUSD was algorithmic – using code to maintain its price at around one US dollar based on a complex system of minting and burning.
A TerraUSD token was created by destroying some of the sister cryptocurrency Luna to maintain the dollar peg.
To maintain demand for Terra, Terraform Labs started offering eye-watering interest rates, which many critics derided as a Ponzi scheme.
When the TerraUSD crashed, investors panicked and tried to pull out their money, causing a vicious, self-perpetuating bank run.