Luna Foundation Guard (LFG), a non-profit organization founded by Do Kwon, acts as a Bitcoin collateral backstop for the Terra ecosystem. It has refuted claims of transferring crypto tokens to multiple crypto exchanges after a warrant was issued on Do Kwon on September 14.
South Korean prosecutors are taking steps to freeze assets associated with Do Kwon, who is suspected of breaking securities law in the country. Two exchanges, including KuCoin and OKX, have been requested to freeze a total of 3,310 Bitcoins, worth close to $64 million as per the latest price.
These coins have been moved from a wallet linked to LFG and are allegedly controlled by Do Kwon. This news was confirmed by an official at the Seoul Southern District Prosecutors’ Office; however, they refused to give any comments on the same.
Authorities from South Korea looked after Kwon’s arrest this month and claimed he was on the run. They got help from Interpol to locate Kwon, and a Red Notice, which is given when a fugitive is wanted for prosecution or to serve a sentence, was issued consequently. However, his current whereabouts aren’t known, and the Singapore government claimed his absence in the country.
I am not “on the run” or anything similar – for any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide
— Do Kwon 🌕 (@stablekwon) September 17, 2022
Kwon took to Twitter to defend his position, saying “I’m making zero effort to hide”. He also mentioned going on walks and to the mall, and that no one from the CT has run into him for the past couple of weeks. However, he did not reveal his current location.
KuCoin, OKX and the Authorities
The authorities involved in the matter refused to comment on the identification of Kwon’s association with the Bitcoin transfer.
According to CryptoQuant, LFG set up a digital wallet on September 15 and sent 3,310 Bitcoins to KuCoin and OKX. “CryptoQuant specified new Bitcoin addresses owned by LFG based on transaction patterns, adjacent flows and material non-public information,” the platform said in an emailed statement.
Luna Foundation Guard, in response to the statement, said that they haven’t created any new wallets or carried any transfers of any digital currencies since May this year, and proceeded to post a wallet address on their Twitter for proof.
The LFG treasury’s $BTC wallet is:
— LFG | Luna Foundation Guard (@LFG_org) September 27, 2022
CryptoQuant then replied to the tweet, essentially suggesting that LFG has a different wallet address not linked to the organization. Kwon also disapproved of any claims made by the platform. Additionally, he also mentioned that he hasn’t “cashout’ and hasn’t used both exchanges for at least the last year. And that no funds given to his organizations were frozen.
Further, KuCoin agreed to cooperate with the prosecutors and froze 1,354 Bitcoins transferred to the exchange. A spokesperson for OKX confirmed receiving a request from the Korean authorities, saying they’ll be “cooperating with their investigation.”
There was no further comment on the LFG tweet by the South Korean Authorities.
The Crash That Expended $3.5 Billion
Do Kwon, along with Daniel Shin, founded Terraform labs in 2018 and launched their first cryptocurrency token (then) LUNA in 2019.
The operation of the token relied on its sister token, UST, wherein a specific amount of LUNA could be burnt to mint UST to maintain its 1:1 peg with the US dollar and vice versa. This mechanism was functional until it wasn’t.
In May, over $2 billion worth of UST was taken off the Anchor Protocol and more than a hundred million of it was liquidated. This sell-off brought the price of the UST to $0.91, and traders exchanged their $0.91 worth of UST for $1 worth of LUNA. Naturally, the stablecoin got depegged and this resulted in increasing the supply of Luna and as a result, the price of the token went down to fractions of a dollar.
LFG bought $3.5 billion worth of Bitcoin between January and March, which later turned out to be of no good as almost all of the reserve was spent in trying to stabilize UST and LUNA. The reserve was created to be used in times of stress to keep the network functional.
The Luna crash was recorded to be one of the most significant events in the crypto space as it led to the downfall of the entire crypto market, which wasn’t performing ideally at the time anyway. And although going just by Terra’s market cap, the crash resulted in a loss of more than $40 billion. It’s suggested that since the crash pulled the price of Bitcoin by itself, the actual loss could surpass $300 billion.
Do Kwon later shared a recovery plan for the token, launching Luna 2.0, now known as “LUNA”. And a significant number of investors were supportive of the plan. And although lately, the coin is far from its previous all-time high, there have been spikes in the price recently. Displaying some restoration of trust in the cryptocurrency by investors.
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