Vitalik Buterin (pictured), who developed Ethereum, the second-largest virtual asset in the world by market capitalization, criticized the collapse of the Korean coins ‘Luna’ and ‘Tera’, saying, “The Ponzi fraud experiment should be stopped.” Terraform Labs, which issues the two coins, collected investors saying that they would give 20% interest per year when depositing Terra, which is similar to a Ponzi scheme (multi-level financial fraud) that pays profits to existing investors with the money of new investors.
According to Benzinga, an American economic media outlet, on the 16th (local time), Buterin is an Australian hypothetical that ‘the Ponzi scam and algorithm-based stablecoin (coin designed to be linked to fiat currencies such as dollars) should stop experimenting’. We strongly support the comments of asset expert Anthony Seossano. “The name algorithmic stablecoin is an exaggerated propaganda term,” Buterin said.
In Korea too, Hyundai Card Vice Chairman Jeong Tae-young pointed out on his Facebook page on the 17th, “Even the best investment fund in the world cannot promise 20% deposit interest.”
In fact, it was the unprecedented interest rate of 20% per year that grew the Luna and Terra ecosystems. Terra, designed to be pegged to the dollar, has maintained ‘1 tera = 1 dollar’ by issuing or burning its sister coin, Luna. When the price drops, Terra Coins are deposited from investors and interest is paid at an annual rate of 20%. In fact, because of the structure that allows you to earn high profits by depositing in dollars, the demand for Terra investment soared, and the price of Luna soared more than 100 times last year alone.
However, this year, as the market’s doubts about its ability to pay interest grew, sales volumes for both coins poured out at the same time, and the ecosystem collapsed in an instant. Luna, which was traded at 100,000 won on the 6th of this month, fell to 0.7 won on the 17th. Tera also effectively lost its stablecoin role at $0.13.
As investor losses snowball, class action lawsuits are also showing signs of intensifying. On the same day, on the online cafe ‘Tera/Luna Coin Victims’ Meeting’, an article was posted saying, “I am about to accuse Kwon Do-hyung and Shin Hyeon-seong, co-founders of Terraform Labs, for violating the Act on the Regulation of Fraud and Similar Receiving Behavior.”
Koh Seung-beom, chairman of the Financial Services Commission, said on the same day, “It is estimated that there are 280,000 Korean Luna users, with 70 billion of them.” The Financial Supervisory Service Commissioner Jeong Eun-bo also emphasized, “We should try to understand the circumstances and causes of damage related to the current crisis so that measures to prevent unfair trade and consumer damage can be faithfully reflected in the Digital Asset Framework Act to be enacted in the future.”
Reporter Kim Ja-hyun zion37@donga.com
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