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News outlets in South Korea reported last week that local authorities couldn’t determine the whereabouts of Terra co-founder Do Kwon in the country. The reports surfaced a day after an arrest warrant was issued against six Terraform Labs officials residing in Singapore – where Terraform Labs has its headquarters – on September 14. The warrants are a culmination of an investigation that began against Terra four months ago, after the plunge of its native UST stablecoin and LUNA token that wiped away $40 billion in dollar value from the crypto market.
Calling for a probe into Terra, victims complained that the Terra co-founder misled them. Korean authorities consequently started acting on these allegations that Kwon issued LUNA and USTC without notifying investors of the risks if the Terra ecosystem lost its depeg. Last month, investigators raided the offices of Terraform Labs and other companies allied to it.
Korean Prosecutors ask Interpol to issue a ‘Red Notice’ for Do Kwon, also seek to revoke his passport
According to local media reports, Seoul Southern District Prosecutors’ Office’s Joint Financial Securities Crime Investigation Team asked the country’s foreign ministry to invalidate the passports of Terraform Labs founder Do Kwon and four other individuals. The request was submitted on the grounds of Kwon being on the run.
The self-declared ‘King of LUNAtics’ responded to the reports of fleeing on Twitter, clarifying that he is not hiding or evading authorities as alleged. Kwon reiterated that he is ready to cooperate, having nothing to hide from investigators. In one of the tweets, the Terraform Labs chief also provided a rather vague update on the state of affairs.
“We [Terra] are in the process of defending ourselves in multiple jurisdictions – we have held ourselves to an extremely high bar of integrity, and look forward to clarifying the truth over the next few months,” he wrote on Saturday.
In an interview released last month, Do Kwon said he was willing to cooperate with Korean authorities but denied any claims that the prosecutor’s office had reached out to him. Less than a day after reputing rumors of being on the run, fresh reports have emerged contradicting his tweet. Yonhap News Agency shared in a September 18 post that Do Kwon has neither shown any intention nor made efforts to cooperate. Bloomberg also reported on Monday that the prosecutors involved have moved to request a Red Notice for the disgraced crypto figure.
Legal experts say that the prosecution might find it challenging to build a case against Kwon since there are no laws to govern crypto marketing in South Korea. The Terra chief and others including his partner Daniel Shin and CFO CJ Han could be prosecuted under the Capital Markets Act if the Terra coins are found to be securities.
Terra Classic staking pushes LUNC prices up before immediate correction
CoinMarketCap tracked the LUNC/USD pair trading at $0.000086 on August 20 before gaining roughly 400% to reach $0.00044 on September 6. The uptrend, which started in the latter days of August, peaked in September. Particularly, between September 5 and September 8, the price of LUNC rose by 132% to $0.00058. The latest market data shows that the token has retraced back to $0.00031, where it was observed trading on Monday.
Meanwhile, the revived token LUNA is changing hands at $2.90 with an equivalent market capital of $370 million. The token’s dollar value climbed past $5 on September 9 but it has struggled to retain the upside momentum since touching a three-month high of $7.06 at the height of that weekend’s rally. Terra critic FatMan Terra theorized at the time that the price pump was because of the sudden transfer of 435,000 tokens from Terraform Labs to Binance.
So, what exactly was responsible for the recent divergent stance that the tokens established? Following the ‘demise’ of the formerly Terra network, the most significant challenge has been finding a way to manage the LUNC supply that had slipped into multiple trillions, deflating the value.
A ‘lucrative’ staking service for LUNC
LUNC DAO was launched as a community validator after the Terra blockchain failed, with the ambition to inspire the community to realize the dream of reviving the now-defunct network. The DAO has been one of the major push factors that have caused the price of LUNC to surge in recent days. On August 27, it announced the launch of a staking service for LUNC to reduce the number of tokens in circulation.
For LUNC staking, rewards can be earned in one of two ways: directly staking, acting as a validator delegate (running a node) and ranking in the top 100 during the time that LUNC was delegated, or by entrusting LUNC to one of these validators. Interested users can easily and securely delegate LUNC right away from their wallets.
Staking Rewards shows that staking LUNC gives an annualized reward rate of 37.8% when delegated and 42% to those running validator nodes. At the time of writing, the staked tokens are 573,745,379,512 LUNC (bonded) and 84,468,046,337 LUNC (unbonded), translating to a staking ratio of 9.535%. Based on these figures, it remains a tall order given that there’s as much as 6.9 trillion LUNC.
The tax parameter change proposal
Further, Terra Classic is also slated for a tax parameter change starting September 20, should a proposal that has been put in place to that effect pass. Proposal 3568 suggests a 1.2% tax that would be charged on on-chain activity. Also, while off-chain activity will be excluded, interactions such as moving tokens from hot to cold wallets would be taxed.
Even with an intention to burn all the tax, this effort to make LUNC deflationary will be capped at a maximum tax of $10 million. In case the proposal fails to gain approval, the development team intends to set up a desktop app, an unofficial website, and a mobile app for the very purpose of slashing the token supply.
Crypto exchange KuCoin was among the first exchange platforms to extend support for the initiative, advising all LUNC holders to deposit their tokens before fees blow through the roof. This announcement was criticized by pseudonymous FatMan Terra, who labelled it a “Nothingburger PR post”. Other exchanges that have shown support for the tax burn proposal include Binance and Gate.IO.
The constants in the market: Concern and risk
The LUNA and LUNC tokens are trading slightly in the green on the day. However, on-chain metrics and price technicals suggest that both could be poised for further declines. In addition, the network is yet to shake off the worry it built up during its collapse and inspire confidence despite efforts toward resurgence. Nonetheless, the LUNC community is much more optimistic and continues making progress in reducing the token supply in circulation to regain its value.
Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.