Terra Founder Faces Insider Trading Scandal While Investors Lose Money

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Do Kwon

Terra is currently the most controversial crypto coin that has been in the spotlight for the wrong reasons. Presently, Do Kwon and Terraform Labs are in the mix of multiple social and legal allegations. 

The latest reports from FatMan showed that the Terra founder and a group of VIP Terra investors had plans to cash out while others were in anguish after losing their investment during the LUNA and UST crash.

Terra UST-LUNA Tokenomics Explained

According to the original Whitepaper, Terra Luna’s basic tokenomics state that a user can redeem 1 UST for an equivalent $1 worth of Luna. The vice versa applies the same way. During a UST de-peg, as it happened in this case, UST would be converted into Luna at a very high rate until the UST is pegged again.

If de-peg isn’t restored, Luna will crash hard towards zero value. This scenario is why UST and Luna fell hard.

However, while the crypto crashed, Do Kwon and his VIP group of validators were swapping large amounts of UST into Luna.

Related 👉Binance Investigates Serious ‘FatMan’ Claims Against Terra 2.0

Validators To Alter the Tokenomics in Their Favour

The group planned to change the base tokenomics of the crypto and reap big when it eventually reversed course and recovered.

They also restricted access to staking, meaning that the rest of the Terra community was totally in the dark and couldn’t stake.

“Behind the scenes, a closed group of validators decided on a course to change LUNA’s fate. They would radically change LUNA’s core tokenomics by disabling the market module to prevent a governance attack and stake large amounts of LUNA themselves.”

In his tweets, FatMan estimates that this group of insider traders stands to reap profits to the tune of over 60,000% APR from LUNC (the newly renamed Luna Classic). The APY is around 700,000%.

The community are currently displeased with this new information. These allegations could spark yet another investigation against Kwon and Terraform Labs. This time around, the involved Terra validators could also be subjects of investigations.

Currently, the South Korean government is investigating the collapse of Luna, and this new information, if proven to be accurate, could be used by the authorities.

Read also 👉Binance Has Decided to Stop Terra (Luna) Futures Trading