Last week, a columnist described Terraform Labs’ co-founder Do Kwon as “the Elizabeth Holmes of Crypto.”
Elizabeth Holmes is a former CEO of the now-defunct Theranos health technology company. Just like Terra, Theranos collapsed in 2016 after being hyped and valued at a whopping $10 Billion in record time before investors realized it was all hot air. In 2018, after Theranos shut down operations, Elizabeth was charged with “massive fraud” and attempts to cover up the said racket.
Fast forward to May 2022, Terra’s co-founder and the Terra team could be staring at the same fate, after their much-hyped Terra ecosystem fell sharply last week, taking down with it billions of dollars in investor funds.
According to reports, most investors are not stoked by Terra’s comeback plan and are considering taking legal action against the network’s founders. According to a Wednesday report by Munhwa, a local Korean media house, LKB & Partners, one of the top law firms in South Korea has decided to take Do Kwon to court over the LUNA/UST incident.
The firm plans to sue Terraform Labs CEO Kwon Do-Hyung (Do Kwon) for fraud as well as apply for the seizure of property this week after several investors enclosed it.
“There are related investors inside the law firm, and we plan to file a complaint against CEO Kwon at the Financial Investigation Unit of the Seoul Metropolitan Police Agency,” Kim Hyeon-Kwon, a partner at LKB & Partners said. In a separate report, the law firm stated that it is also considering suing Daniel Shin, another Terra co-founder.
Apart from the LKB, the operator of a Naver Cafe space named “The Terra/Luna Coin Victims Association” which has over 1500 members posted a notice on Tuesday saying, “Next week, I will submit a complaint and complaint against the co-founders Kwon Do-Hyung and Shin Hyun-Seong to the Seoul Southern District Prosecutors,” for fraud.
Other investors have reportedly filed complaints with the local police agency, accusing Kwon of fraud. Various U.S based law firms have also asked victims of the Terra incident to file complaints about class-based court actions.
Whereas there is a strong case against Kwon and his associates, it might not be that easy to navigate the case in court given the lack of crypto regulations. According to a report by a newly formed Wikipedia page, Kwon had allegedly filed to dissolve Terra’s Korean entity in April before receiving approval on May 4, days before the crash. That said, the trials could stand on the fraud allegations, prompting the court to order the seizure of Kwon’s personal property, a fine, a prison term, or a combination of them all.