I urge everyone to read this proposal, and get on board with it. Legal action is coming. The days of letting ponzi scheme artists decide what happens with the remaining funds are OVER:’
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People like Kwon, that’s the only way they learn. Sad but true.
I’ve been saying for months that for Terra to work and be a success, TFL needs to dump Kwon. Sadly, it was not a real company, it had no effective board (if it did, Kwon would have been dumped like sour milk long time ago - it was obvious for a long time that he was a major liability to Terra as a whole). Kwon ran Terra unopposed, with no checks and balances in place, as his own little fiefdom, while publicly acting like a jackass, taking on reckless danger, and clearly having not the faintest clue of the legal fiduciary duty that he had to the holders of his unregistered security and the depositors.
Criminal probe is definitely one part. Hopefully he gets extradited to the US and spends the rest of his life in jail, where he belongs.
But what the community really needs is an intentional, major, law firm to take on a civil case for fraud, embezzlement, unjust enrichment and everything else that went on, and to pursue that in whichever jurisdictions (Korea? US? Singapore?) where there’s the best chance to bring Kwon to account, and to get a court order to seize all of his and his relatives assets (and his enablers at TFL and LFG also, who are also complicit in this, at the very least as willing accomplices). Sure, the law firm will make the most. But Kwon will learn a lesson when he’s out on the street (or better yet, in jail) penniless, as will other Kwon-wannabees.
Edit: in the meanwhile, there really should be enough Korean victims to organize a 24 hour watch of Kwon’s residence in Seoul, to make sure he doesn’t escape the country (Korea). He has already called for police protection two days ago, when his victims started coming to his house. Of course, no one should engage in violence (which is what he, with no basis or justification behind it, claimed he feared when he called the police to provide him protection). But he is definitely a flight risk. A billionaire flight risk. With billions of funds that he got by defrauding others. Until the Seoul Metropolitan Police put an ankle monitor on him and he gets added to the no-fly list (that may take a while) and cannot leave the country, the South Korean Terra community needs to keep a 24-by-seven watch of his residence and make sure that he doesn’t flee to some non-extradition country (stuffed in a suitcase or something, remember how Carlos Ghosn got out of Japan).
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Yeah. Unfortunately his actions, especially as the depeg event was happening were factor for ruining us all.
Is it him we pursue or TFL? I believe his actions were done under the TFL name and i think he holds no ownership in holdings just his company.
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It’s Kwon personally - any good law firm will find a way to tie him in personally (e.g. it’s his personal Twitter statements that he was making, he himself proclaims himself “master of stablecoin #luna” - he has broken the corporate veil through his own numerous actions), in addition to TFL, LFG, and their enablers. That includes all the board members of TFL and LFG and all the VCs who backed them.
That is who you want to go after. The deep pockets. Kwon, TFL, LFG - of course. But where most of the recovery may be had will be had from the VCs who have 100s of Millions if not Billions of dollars on hand, literally. They profited from it. May be all of Jump Capital can be wound down and its assets sold and distributed to the victims here. Or may be just their gains and profits made from Terra (and same for other VCs involved, who were all complicit in this and are certainly co-conspirators and were part of the fraud; their, and the board’s, duty was to oust Kwon and expose this, take appropriate risk mitigation measures, but they egged him on and supported him down the reckless path instead). And if not the VC company, then at least the individuals from it who participated in TFL and/or LFG decision making, governance and had the inside info (those are the real deep pockets here).
That’s how these class action lawsuits always go. There’s 10s if not 100s of defendants, corporate and individual. 1000s, or in this case, likely 10,000s or even 100,000s of plaintiffs. Too many law firms representing different interests to count. Probably a few years of investigation and legal maneuvers by all parties, then months long trial, while it’s all sorted out. That’s the formula how these things typically work. It’s painfully drawn out, but at least it gives some closure in the end.
The priority is finding a GLOBAL law firm that will take this on a pure contingency basis. That and I think there’s such a thing as a lead plaintiff (at least in securities I’ve seen that, usually it’s someone who lost a particularly big amount). What the lawfirm needs to see is path to real recovery from deep pockets. That is why the TFL, LFG board members and VCs are important to tie in, in addition to Kwon. And they are the enablers, and certainly co-conspirators. Without them, Kwon wouldn’t have been able to pull this off. And they knew what was going on as they had inside information and a duty to act on it as they saw and knew what was going on, yet did nothing.
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Thank you for the legal information. Your right, so many VC’s promising new partnerships and billions really brought trust to the community. Once things went down hill they should have halted the blockchain and organized a debt restructuring immediately.
How do you see each party tackling the avenue, so for example, I was a bluna holder, effectively a shareholder of a security, thats how it’s classified in my tax filings and I understood that. I also understand that means different implications (such as no recovery of funds) versus UST holders but his actions had caused monetary damage. Especially after the depeg event had started. Same with Jump’s. So where would I fall into in a class action?
So in addition, I know people who bought the “dip” mid dillution without any clear signal or guidance that a dillution was happening, no advice of my own but greed tempts people. Hell most of us didnt even realise how bad the dillution would be, only the ones who experienced it before.
My own company was building on Terra for a crypto currency project and this has cost us development time and resources, are these also compensatable?
We were lucky that this blew up before we launched on the platform. We were looking away from terra due to our legal counsels advice not too long ago and then this happened so I guess you could call it dumb luck. Also a good reason to be working within the confines of the law in your country / juridstiction versus all of this “full decentral anon no recourse nonsense”.
Can admit such statements are powerful and misleading to the public while things are going well, easily creates an echo chamber. DAO’s are no different than LLC’s or other organizations there is always a lead person figure and none of these are fully decentralized or automated once you take off the rose glasses, we have strong parallels of governance that work within legal means and provide security and protectino from bad actors. If your offering a dollar and a savings account you need to operate in a fiduciary / money market regime which has very strict and tight requirements in most countries. that includes transparent information about how the dollars are backed.
Lots of stuff to think about and go over. We’re still re-deciding which blockchain platform to redeploy on. What a mess this has become. In all honesty if they had just done what the law requires (there is always a way, thats the founders job, lawyers tell you what not to do, so you dont do it and find means to accomplish what you want.). Will definitely be consulting regarding this whole mess, both to see what avenues we can explore and to learn lessons from this project.
I think if they end up rebooting the system it should be a seperate blockchain, wouldnt that wipe out a ton of the evidence of misdoing.
To be clear, the main thing that would lead to litigation would be this?
Back in september-november: TFL/LFG/DO partnered with abra to drive up artificial demand of UST, they burned luna to mint hundred of millions of UST to prop up the protocol TVL, this was deposited in liquidity pools on curve and partnerships were formed between abra-tfl/lfg-curve finance.
LFG accumulated UST via this burning mechanism by burning a little luna at a very high value, basically this started incurring luna shareholder debt without telling them, as the most likely time for that stablecoin to be redeemed is when luna was at a lower price.
Then they used this UST money to purchase BTC on spot market, otc, etc. Accumulating up to the tune of 80k btc. This released the UST that was issued at high luna values into the market. Value was transferred to LFG, while the debt was offloaded to unsuspecting btc sellers etc.
this UST eventually found its way onto Anchor via a variety of means (leverage abuse on aUST from other protocols, just unsuspecting people trading usdc / usdt for ust to deposit on anchor, etc). That was the plan from the start, because if it got to Anchor it wouldnt have been seen as debt.
Meanwhile LFG used more minted UST money to prop up the Anchor reserve, providing incentive for the debt to remain. But this was actually accruing 20% interest on 14B+, all brought to the liability of luna shareholders.
Naturally none of us were thinking this because we thought the market module would always provide enough liquidity to be servicable. Well when luna crashed from the first liquidation cascade on anchor it was no longer servicable and liquidation via share dillution occured. After all was said and done the entire ecosystem went fully insolvent with STILL 11 billion in UST liabiliities to be paid. The vast majority of Luna shareholders were not made aware of this situation.
So the primary actions of Do have been issuing unservicable debt without approval of shareholders (staked luna holders), then dillution of the shareholders shares to service it, also without permission in an emergency temporary governance proposal when fear was at maximum. This was all in tweets. If this was not done the damage could have been avoided. whoever popped the bubble knew this and did so with that knowledge. Can they be held accountable as well somehow?
The debt notes (ust) itself was sold off for other assets (primarily bitcoin) which were collected into a holdings corp (LFG). When the thing went to shit LFG acted with the holdings (which should have been under shareholders, stluna control) in a way which was not approved by any mechanism. The approved mechanism was to use it in swaps with the market module, this was not done. a violation of trust.
@narco78 can I bug you for more information, You’ve seen the whole event transpire on chain since November and can provide more details of the actions. I think my account of events is rather complete but I can definitely be missing things.
Is the new blockchain left out of this picture. In all honesty I don’t want to see the builders get recked from a class action lawsuit, they had no say in this.
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Absolutely, the builders are just some of the innocent victims. They added tremendous value to Terra, and now end up suffering for it.
I don’t know how is UST treated legally. There may be no clear precedent for an algorithmic stablecoin legal treatment. And how it’s treated will depend on the jurisdiction where this is decided.
The right analogy here is stocks and bonds, I think. Bonds take precedent over stock. In a liquidation bond holders get priority over stock. When and if they are made whole, any remaining scraps go to the stockholders (oversimplified; there’s various classes and types of stock, like preferred shares, etc.).
UST and aUST holders were depositors, expecting it to be what it was represented as, a digital dollar (UST) or a digital dollar savings account (aUST). Closest parallel I see here is bonds, and I think that it would take precedence over LUNA (and it’s derivative) holders.
LUNA is an unregistered security. (By US law I think investment in Luna should have been limited to accredited investors, due to the inherent risks and lack of transparency. That is, limited to those with higher total income or total assets and sophistication/experience.) In any investment, registered or not, you implicitly expect a potential total loss of investment as a possibility. That being said, it does not absolve those issuing it and in control (the parties we’ve identified, and one we’ve not identified - yet) from their fiduciary duty to the investors.
Actually come to think of it, the claim recovery for UST and Luna may come from different pools. For UST, from TFL and LFG assets in a liquidation (nothing will be left over for Luna holders). May be VCs, not sure. For Luna, more from the individuals who made the decisions - due to breach of their fiduciary duty. That includes the validators whose votes are public record (no way they can escape from this). Kwon, the self proclaimed “master of stablecoin #luna”, for both UST and Luna. And of course everyone’s insurance companies (if any of Kwon, TFL, LFG, board members, the VCs and validators have good corporate or personal liability insurance, the recovery pool may be quite a bit larger than their actual assets - don’t forget, so there is certainly good reason to pursue this).
What you are particularly unhappy about is the inflation and massive dilution of Luna. But, that was part of the design spec (and investment thesis and the known risks): it was always known that Luna exists solely to hold up the Terra stablecoins and can go down to fraction of a cent in a large event to support the peg. That is, that Luna value is tied directly to UST demand volume. So, there the recent decisions of the validators are a major factor.
I can see there being two separate overlapping class actions, one for UST and another for Luna holders, as the interests of the two groups are not always aligned, and sometimes contradictory. I hope we don’t get such extreme bifurcation, though. That would make it become exceedingly toxic and even harder to salvage anything from.
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Where is the proposal? …It is best to create a web page for any discussion on this topic where people can leave their contact information.
UST’s depeg does not make mathematical sense.
We all bought UST with real dollar on a 1:1 peg, even Anchor has paid a 19% yield on the deposited UST in the past 1-2 years (?), the value in UST deposit should not have been diluted so fast as to now each UST is worth only $0.11.
How the value in our hard USD was diluted (and possibly siphoned somewhere else) while deposited as a pegged ‘stable’ coin, is in question.
Terra may not be able to offer UST depositors an answer, but it owes its UST depositors their money back.
It is not always about doing things right. (Clearly not everything has been done right.) Now it is about doing the right things.
The following proposal makes sense, if applied to the UST depositors who had held UST all the way until days after the depeg, before the halt of the Terra blockchain– [Proposal] Tiered repayment: airdrop USDC/USDT to small UST holders on Terra - Governance & Proposals - Terra Research Forum
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Oh man I have completely lost track of events, but I was definitely starting to smell a rat back in late November when TFL were using ‘Project Dawn’ and the Abracadabra degenbox demand to funnel 100’s of millions of UST through the UST-MIM curve LP and sent USDC and USDT out into various exchanges and other LP’s.
I am sure some of my old posts have all the links and evidence attached, including blockchain evidence of it. Since it is all on chain and recorded within the ETH blockchain history, it should be fairly easy to find via their known public wallets.
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My god hey,
For information for anchor protocol heads, I don’t think anchor itself is the problem here but the massive money printing and fiduciary negligence lead by TFL lfg and their leader do kwon.
I’ll do some digging on narcos old posts and organize a thread. All of the on chain evidence is here.
I don’t want to see any devs hurt just a precedent set for vcs, TFL, lfg anchor was just a means to utilize them, lfg should not have topped off the yield reserve with bad debt.
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Thanks for the additional info,
Yeah my Lunas probably a lost cost unless some lucky money comes in from this.
There is a good post here on agora
This should be the path forward for the community.
Thanks. That’s exactly what I thought, but organized much better, and that lawyer is right. The different victim groups each need to have their own (semi-private) discussion and to appoint their own representative, but then in the end, through their (non-emotional and rational) rep, work with the other victims, to come up with joint mutually fair restructuring. Otherwise it’ll become exceedingly toxic and will be the various groups going against each other, losing track of the real perpetrators and responsible parties.
That, but also what it misses, is what @BTFD said, which I think is true: there really should be some emergency legal measures taken NOW to freeze TFL, LFG, Kwon, and to the extent so possible involved VCs and board member, assets, so that they can’t dump, run and hide. I think that this being resolved without a massive class action lawsuit (or more likely, multiple class action lawsuits from the different victim groups, ultimately getting consolidated into one big huge mess of a case) is as likely as UST going back to peg.
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SEC is monitoring the situation so I think right now it’s extremely difficult for the bad actors to escape this mess.
Kwon, TFL and LFG are physically out of reach of US law. Well unless Korean (and if there’s anything in Singapore, Singaporean) authorities fully cooperate with US law enforcement requests.
Thankfully though most of the VCs are not, and hopefully they are also in the SEC’s cross-hairs.
Speaking of the SEC, this could be the landmark case they’ve been dreaming of, where they assert their authority over crypto.
You invested in this project knowing there was risk. When you lose, you want to sue? What the hell is this crap?
You knew what you were getting into! Crypto is risky as fuck!
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Project dawn was something done under the nose of luna investors, and UST holders. UST was marketed as a dollar asset product not a debt instrument which it actually is revealed to be.
Project dawn was a spending of investor funds without consent or knowledge. It lead to the outstanding UST debt and the dillution of shareholders.
Crypto is risky as fuck but it still has to operate within real world law. This whole lawless bullshit isnt going to be able to pass anymore. Do you think lawmakers are content with seeing their public get their entire savings blown year after year, month after month? I think not. Even if so, it would lead to the death of crypto eventually.
There needs to be precedent and an approach to work with law makers, turning our digitized contracts into law and securities. There are real world analogues to all of the products in cryptocurrency and cryptocurrency should be seen as such. This is better for crypto in the long term.
Kwon essentially borrowed funds via lfg and project dawn, funny isnt is that those debt notes were sold into the curve pool for unsuspecting abracadabra investors, and we were thinking of those guys as the bad ones.
None of us were thinking “kwon is borrowing billions from our luna value” infact it wasnt ever announced in a public way.
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If the BTC reserves don’t reappear and make some late UST holders partly whole again, then jail and lawsuits are fully deserved.
Yes, crypto is risky but this is looking like a multi-billion dollar rug pull so far…
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It does look that way. Ever since the announcement of Project Dawn it does seem TFL were preparing their exit strategy ahead of this almighty collapse.
On the other hand they clearly threw 100 ‘s of millions of dollars in USDT and USDC trying to ‘save’ the peg.
It was either fraud or incompetence or perhaps something down the middle.
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Certified documentations on how the reserve and other funds have been spent would help clear things up for LFG.
Here is a good read. It’s in Chinese. But click on page and in the drop down menu, select ‘Translate to English’ – 【深度分析】看Luna崩盘的底层数学规律 - General - Terra Research Forum
What Happened to the $3.5 Billion Terra Reserve? Elliptic Follows the Bitcoin
==================================================================
“Every month, TFL cashed out tens of millions of dollars for salaries and operating expenses. This went into hard money like USD, BTC and SGD. At their peak, TFL’s 70 employees were receiving $180,000,000 monthly.”
…All of this money was taken directly out of the LUNA market cap (which was supposed to stabilize UST)…"
Do Kwon and Terraform Labs defrauded the retail public of hundreds of millions of dollars that they currently still have. It came out of the pockets of LUNA & UST holders and went into their wallets. Here’s why you should be mad, and here’s what you can do about it.
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This is a good read — Next Steps for LUNA/UST Holders: A Detailed Analysis - Markets and Macro - Terra Research Forum
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looks like fork is set in motion.
Anchor should be recieving a sizable portion of the forked assets. I have started a community proposal for what how to handle the assets. This might be a more stable and fair way to ensure wealth is appropriately distributed.
Lets save our money and have Anchor work this out in a trusted manner under jurisdiction. This would set a more favorable precedent for developers over a class action.
With that said. VC’s and LFG/TFL should still be pursued for project dawn.
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