The Financial Times (FT) reported on the 24th (local time) that the CEO of Terraform Labs, Kwon Do-hyeong, who was once revered as a giant in the cryptocurrency (virtual currency) world, is now the most hated man in Korea.
After graduating from a prestigious foreign language high school in Seoul, Kwon majored in computer science at Stanford University.
He co-founded Terraform Labs in Singapore in 2018 with Daniel Shin, founder of Korean e-commerce company Ticket Monster. After that, he issued a stablecoin (a cryptocurrency with no price fluctuation) called TeraUSD (UST) in 2020.
Stablecoins are usually pegged one-to-one with a government-issued currency such as the dollar. However, unlike traditional stablecoins, UST has adopted a different algorithm.
Terra supported its value with a cryptocurrency called ‘Luna’. When the price of Terra falls, investors can deposit Terra with Terraform Labs and earn up to 20% in arbitrage in exchange for $1 worth of Luna.
This way, when the price of Terra goes down, it reduces circulation and raises the price again to bring its value to $1.
Terra bought about $3.5 billion worth of Bitcoin to maintain the value of UST and Luna. He had bitcoins as a reserve.
However, as a result of his doubts about UST, a ‘Terra run’ (a phenomenon in which money is taken out of Terra) occurred and the price plummeted, and he sold a large amount of Bitcoin to maintain the value of UST.
As a result, cryptocurrencies around the world plummeted. Even now, Bitcoin, the representative cryptocurrency, is below $30,000.
Kim Hyung-joong, head of Korea University’s Cryptocurrency Research Center, said, “Kwon insisted on decentralized finance, but he made all the decisions alone. It is ironic that the company’s decision-making is so centralized.”
Kim Dong-hwan of Blitz Labs, a cryptocurrency advisory firm based in Seoul, said, “Kwon Do-hyung was once like a successful cult leader. But he is now the most hated man in Korea.”
It is known that Galaxy Digital CEO Michael Novogratz, who claimed to be the evangelist of Terra and Luna, suffered a huge loss due to the Terra incident and that many institutional investors were bitten by Terra.
But the most fatal losses are the ants (individual investors). “She was dazzled by the idea that she could make at least a 20% return,” said one woman, who is an office worker and mother of three. “I deeply regret not looking deeper before investing,” he added.
Kwon did not respond to the FT’s request for comment. He wrote on Twitter shortly after the collapse of Terra, “It breaks my heart that my invention has inflicted pain on all of you,” the FT reported.