Do Kwon is a well-known South Korean businessman who has become one of the most well-known personalities in the crypto world.

LThe reason for his fame is in the founding of Terraform Labs in 2018 together with Daniel Shin and in the creation of the Terra project, an approach that catapulted him to stardom cripto and that also meant its greatest disaster in the ecosystem. But who is Do Kwon? How did he get into the crypto world and what projects has he participated in? That and much more we will see below.

 

His early years

Do Kwon was born in 1991 in Seoul, the capital of South Korea. His data on his childhood and adolescence are unknown, because Kwon has taken good care of his privacy. However, it is known that from a very young age he showed a great interest in computing and computing in general. This led him in 2010 to enroll in Stanford University, in the United States, from which he finished his studies in 2015, graduating with a BS Computer Science.

After graduating, Kwon would start working on his own account as a "business partner" of Microsoft and Apple selling their products. Those first years were quite hard for the entrepreneur, but along this path he managed to create his first product in 2015: Anyfi. Anyfi is a solution that allows people to create Peer-to-Peer (P2P) networks using mesh networks, with which communities can be covered to create networks and services for them, even with Internet access.

At the same time, Kwon began to take his first steps as a crypto enthusiast. However, it was not until 2017 that his work began to seriously address the construction of cryptocurrencies, .

Basis Cash, Do Kwon's first stablecoin

Basic Cash, was a cryptocurrency project that sought to create an algorithmic stablecoin anchored to the US dollar and whose model could be replicated to any other fiat currency that decided to join the system. Basically, Basis Cash wanted to become a “financial proxy” where the dollar would be the common currency that would interconnect several “Basis Cash Stablecoins”, with their own value and interconnected system. The idea is not unusual and, in fact, it is what was intended to be created with projects like Libra (Facebook's Diem) and TON (when it was officially supported by Telegram).

The whitepaper for this project was released by Nader Al-Naji, Lawrence Diao, and Josh Chen, but behind it all was “Rick Sanchez”, an anonymous developer who turned out to be none other than Do Kwon himself. The Basis Cash project got off the ground and raised a total of $133 million from various investors, but pressure from the SEC brought the project down causing the value of its token is below $1. The failure in this case was not in the development of the algorithm, but in the fact that the SEC left them no choice but to abandon the project.

However, Basis Cash laid the groundwork for Do Kwon not only to have the idea, but also to meet the people who could help him make it a reality, and that is where the TerraLabs story begins.

Terraform Labs, the beginning of Terra and Luna

In 2018 Do Kwon founded Terraform Labs with a partner and friend, Daniel Shin. The latter is known for being the founder and CEO of CHAI Corporation. CHAI is a Fintech service provider in South Korea and much of Asia that has become one of the giants in the sector. With Shin's support and knowledge, Kwon was able to make contact with investors with whom he was able to raise a total of $150 million.

Among those investors are Arrington Capital, Pantera Capital and Galaxy Digital, all of them enchanted by a clear idea: to create a blockchain high-speed, integrated with a dollar-pegged stablecoin as a base and the ability to integrate more. It was Basis Cash's idea, but taken to a new level.  Later, Terraform Labs would also raise an additional $32 million, backed by investments from exchanges like Binance, OKX, Huobi Group, and Upbit. In total, 182 million dollars to create this project initially.

At that time Terraform Labs had already launched the development of Luna, which was finally presented in 2019. There, Do Kwon's escalation to success would begin. The arrival of Terra Protocol, its high-speed blockchain Terra, its native LUNA token and the system's stablecoins (UST, KRT and SDT) led to the construction of one of the largest ecosystems DeFi of the crypto world. The success was such that Terra became one of the ten most valuable cryptocurrency platforms in the world in just under a year.

Earth's crash

However, not everything is rosy on Terra. With the price boom in 2021, Terra continued to grow rapidly, DeFi protocols such as Anchor and Mirror Protocol, were heavily influenced by the revaluation of the LUNA token and Terra stablecoins. The high point of this evolution came on April 6, 2022, when the Terra ecosystem had a total of $31,35 billion TVL in its protocols. This data put Terra in fifth position in the crypto ecosystem, until it began to falter.

At that time, the community was already beginning to have serious indications that something was seriously wrong on Terra and UST. Twitter became a battlefield in which Do Kwon was not only unaware of the warnings from the developers of Anchor Protocol (one of its main DeFi protocols) about the infeasibility of Terra with the tokenomcis he was applying, but also from many voices in the community that foreshadowed what was to come in a short time.

In fact, one of the main complaints towards Do Kwon was his refusal to revise the ecosystem yield model. The user @DeFi_Made_Here, clearly called that model a "subsidized yield" and an element in which Anchor (handling 74% of all the economic potential of the ecosystem) did not give spaces for the decentralization and at the same time accelerated the breaking point of the system. The drop on April 6 was the first and only warning, because a month later, on May 6, the fall of LUNA would begin and, with it, UST, the main stablecoin in the ecosystem, would go under. Thus, in just under a week, Terra would go from having a TVL of almost 30 billion to only 9,8 million dollars, creating a financial tsunami and earthquake that affected most of the crypto markets.

In fact, many investors and savers in Terra lost absolutely everything and others put their hopes in Terra 2.0, the new project that Do Kwon promotes to "do things right", being that the only "culprit" of all this fall has been been the same algorithm that supports LUNA and UST, the same algorithm that Do Kwon designed in order to unseat DAI Stablecoin, and that curiously did its job perfectly: it tries to maintain the peg between LUNA-UST and the value of the dollar.

And the only thing the algorithm did is:

  1. Detect UST parity loss and LUNA value drop
  2. Upon detecting the loss, it issued LUNA in order to maintain the peg and reserve value.
  3. But in the midst of constant issuance and fear in the markets, the value of LUNA was depreciating and that triggered the need to issue even more coins.
  4. Since the LUNA-UST peg was not maintained, UST lost value and more LUNA had to be issued to correct.

A process that in a week brought UST to values ​​of $0,000001 and LUNA to values ​​of $0,00001675, a complete disaster for the coin.

Do Kwon's serious legal and community problems begin

Do Kwon is currently under investigation by authorities in the United States (the SEC is investigating him for unauthorized securities issuance) and South Korea (which is investigating him for money laundering, corruption, improper collection and tax evasion). Most of these investigations are at a very early stage and while Do Kwon is being carried out he remains free, replying that he will collaborate with them. A situation that his followers have applauded as positive for the entire community that he believes in the project.

However, a part of the community is also against it and shows strong elements that compromise Do Kwon, to the point where his actions could be considered not only negative, but also harmful and dangerous. One of the strongest detractors of him is the Twitter user, @FatManTerra. With a newly created account, FatManTerra has dedicated himself to researching and classifying Do Kwon information both on-chain and off-chain, making it clear that he has a lot to explain.

One of his public complaints is the possible manipulation of Do Kwon regarding the governance of the Terra protocol. In this case, Do Kwon would use wallets “assigned to third parties” but which would actually be under his control. This is clearly a Sybil-type attack, one that Do Kwon is perpetrating to manipulate Terra's governance in his favor. An element, which joins other complaints and verifiable facts on-chain.

This is where another serious accusation comes in against him and the company that runs Terraform Labs (TFL). TFL should not have new LUNA tokens in its possession, beyond three addresses well known to the community. However, on the Dune analytics platform, the user @fozzydiablo, has been able to trace a continuous outflow of liquidity to at least 14 different addresses using the Curve Mim pool as an intermediary, in the amount of 2,8 billion dollars, and all this before the fall of LUNA-UST . Information that, together with what was said in the previous case, leaves a long shadow of doubt about Do Kwon and the financial movements of Terraform Labs. From this fact, a judicial complaint against Do Kwon in South Korea about money laundering money and tax evasion.

At this point, Do Kwon is world famous, not only for building a platform that helped thousands of people, but also for bringing them down in the worst way possible. Although his attempts to rectify the situation seem sincere, the data that continues to come out puts him in serious doubt. It remains to be seen how all these events are carried out to know the truth, one that sooner or later will come to light.