LUNA Crash Controversy Continues, Founder Called in Hearing, LUNA Hard Fork Considered, Lawyers Quit

2022-05-24, 02:20

Terra founder called to testify in South Korean parliament: A congressman from South Korea, along with his party, submitted an official request for founder Do Kwon to testify regarding the Terra and UST crash.

LUNA hard fork a possibility: Amongst the current potential paths moving forward for the project, Do Kwon suggested the possibility of forking the Terra network into two blockchains; the new one holding a different name for the token while the previous will be entitled Luna Classic (LUNC).

Terra (LUNA) legal team resigns: After Do Kwon was called to testify in South Korea, a large chunk of Terra’s legal team resigned from their positions within Terra Foundation (Terraform Labs). Since then, the organization announced that it’s continuing with legal measures under a different group of legal counsellors not directly associated with the crypto project.

This article covers the latest information surrounding Terra LUNA’s crash, with the structural and legal developments following the project’s main cryptocurrency LUNA dropping 100% while its UST algorithmic stablecoin lost its dollar-per-dollar peg.

Terra Founder called to testify in Parliament

A South Korean congressman wants to hear what Terra (LUNA) creator and founder Do Kwon has to say about the collapse of its system from the cryptocurrencies LUNA and UST. Through this issue, the congressman’s conservative party has issued a formal hearing request for the founder to explain himself in front of the agency.

The issue revolves around the algorithmic stablecoin UST, based on Terra’s ecosystem and the main source of passive income for users, losing its parity to the US dollar and bringing the project to ruin. Through a mint-and-burn loop, not only did UST drop significantly below the dollar but new LUNA tokens kept being minted and completely lost their value. It went from 250 million tokens available to 6.5 trillion, before developers halted the network from generating new coins as a way to combat the insane inflationary levels.

The catastrophic situation impacted millions of crypto investors worldwide, some of who relied heavily on the Terra ecosystem and allegedly lost all of their money. It is estimated by the South Korean congressman and other sources that nearly 300 thousand investors in South Korea alone were impacted by the LUNA crash. There are also reports of investors committing suicide through testimonials across platforms such as Reddit, Discord and Twitter - such information, however, cannot yet be confirmed by authorities.
The congressman in question is Yun Chang-hyun, elected to parliament in 2020. Since Do Kwon is a native of South Korea, the local government has full authority of requesting a legal hearing so Do Kwon can attempt to clarify what has happened and what the path moving forward is supposed to unravel.

New laws coming soon

According to South Korean newspapers in recent editions, the commissary behind financial services oversight Jeong Eun-bo seeks to provide the country with new laws that are able to protect citizens against such disasters in the digital asset sphere.

According to the commissary, current crypto laws in South Korea prevent the government from taking any immediate action to remediate the situation and make sure victims are compensated. He also reported a new study coming out in the country directly related to the LUNA case, which may develop new amendments to their digital asset act.

LUNA Hard Fork a Possibility, Do Kwon Suggests

Terra founder Do Kwon, amongst many other measures suggested, is looking to restart the Terra blockchain after the LUNA and UST fiasco. His most recent proposal, and the one getting the most appraisal by community members through Terra’s “Agora” forum, is to split the blockchain into two versions - the old version and the new one that will be used integrally for upcoming updates.

Titled in the forum as “Terra Ecosystem Revival Plan 2,” it seeks to create a new LUNA currency - title pending - while the previously used tokens will now be called Luna Classic (LUNAC). The suggestion and its names are similar to what Ethereum did roughly six years ago. They split the blockchain into Ethereum Classic (ETC) and the current version utilized by virtually everyone in the ecosystem.

While the process is being executed, the new blockchain will release 1 billion new LUNA tokens for developers, UST holders, LUNAC holders and whoever else was affected by the crash.

The path forward, however, doesn’t have a consensus among developers and community members of the network. Do Kwon currently states that Terra must move forward without UST, its main bread-winner, citing that “Terra is more than $UST.” There are those, however, who claim that UST needs to be recovered since Terra’s entire framework always revolved around stablecoin usage - with UST leading the front. Without UST, it’s tough to see a future for the project unless it recreates itself entirely.

Terra (LUNA) legal team resigns

However, this is just the beginning of issues around the Terra Foundation. Upon request from the South Korean congressman to hold a hearing with founder Do Kwon, a large chunk of Terra’s legal team resigned from their positions.

An unknown source recently revealed to The Block that legal operations are now being treated by external lawyers. Here are a few of the members who resigned from their positions: General legal counsellor Marc Goldlich, corporate counsellor Lawrence Florio and regulatory counsellor Noah Axler. Their LinkedIn profiles are already updated with Terraform Labs associations being dismantled in May 2022.
With everything currently unfolding at Terra, it is completely unclear at the moment whether the project will be able to continue, if legal repercussions will be too harsh and if those affected by the situation will be reimbursed for the debacle.

Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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