In the volatile world of cryptocurrencies, it is possible to make and lose fortunes quickly. But the May 2022 “cryptocrash” was particularly devastating for a man in South Korea.
The sudden collapse of two popular digital currencies in early March stunned investors and wiped $400 billion off the value of several other cryptocurrencies, including the biggest one, bitcoin.
People in different parts of the world have lost their life savings and are crying out for help.
A desperate man was arrested after visiting the home of the inaccessible businessman who was at the center of the “cryptocrash”. He told BBC News his life was in pieces.
“I thought I was going to die,” says the (online video) streamer known as Chancers. “I lost a lot of money in a short time. It was about US$ 2.4 million (R$ 11.3 million) in cryptocurrencies.”
Chancers has been investing in cryptocurrencies since 2017. He says he got rich in the last five years, when the value of bitcoin and other digital currencies soared.
“Here in Korea, I was among the richest 1% of people. But with the fall, I’m in trouble now,” he told BBC News.
Chancers invested $800,000 out of pocket in a digital token called Terra Luna at the worst possible time.
big bet
Terra Luna came to attention in December 2021, when the unit value of the coin began to rise – starting from US$5 (R$23) to a peak of US$116 (R$548) in April 2022. And, like many other people, Chancers bet the coin would go up even higher.
But on May 9, it suddenly collapsed, losing 99% of its value in just 48 hours. Now each Terra Luna coin is worth less than US$0.0002 (R$0.0009 — nine hundredths of a cent).
panic sales
Experts indicate that the downfall of Terra Luna began when its sister cryptocurrency, TerraUSD, suddenly began to lose value.
TerraUSD is one of the so-called “stable coins” – a cryptocurrency token supposedly intended to avoid large fluctuations in value. The companies behind stablecoins try to ensure that it stays at par with assets like the US dollar. So, one token would be equivalent to $1, for example.
But when the value of TerraUSD plummeted, a sell-off began, and Terra Luna (whose algorithm is connected to TerraUSD) also plummeted. And the cryptocurrency world watched in horror as the implosion ripped billions of dollars from other digital currencies.
At the center of this chaos is Do Kwon, a 30-year-old man, notoriously shy of speaking to the press, inventor of the Earth system that served as the basis for the two currencies. Thousands of people sought him out on social media, looking for answers and a plan to rescue the situation.
But, in his desperation, Chancers decided to go further. Outraged by Kwon’s lack of communication, he searched online and found the address of the crypto-millionaire’s home in the South Korean capital, Seoul.
“I wanted to ask him about his plans for Luna. I’ve suffered a huge loss and wanted to speak with him directly,” says Chancers.
Do Kwon has not given press interviews since the collapse of the Terra cryptocurrencies he created.
So the streamer went to Kwon’s house and knocked on the door. He also decided to share the potential confrontation with his followers, broadcasting the event to around 100 people who watched his online channel, on the Korean platform AfreecaTV.
‘I surrendered’
He was disappointed when Kwon’s wife answered and said that her husband had left.
But the worst was yet to come. The police were called and he was arrested. Local media recorded the moment he arrived at Seongdong Police Station in Seoul for questioning.
“I turned myself in to the police twice,” says Chancers. “I didn’t trespass on Do Kwon’s property. But under Korean law, it’s illegal to just go there and try to talk. I didn’t know.”
Chancers says he will most likely have to pay a fine and be booked into criminal charges, making his life even more difficult.
“It’s very difficult,” he says. “I lost a lot of money and now I’m being investigated by the police. I used to work as a civil servant in Korea – but if I’m convicted in this case, I may not be able to return to public service.”
“In Korean culture, the problem itself is not important, but the fact that it caused a scandal. I even had to publicly apologize for having done wrong. I had no idea it would be such a big deal. It’s very sad.” according to Chancers.
Chancers regrets trying to speak directly to Kwon, but claims cryptocurrency entrepreneurs are not being held accountable for the failures of their projects, which affect many people. It is estimated that around 250,000 people had invested in Earth coins.
Chancers accuses Kwon of maintaining insufficient communication with the public during and after the coin collapse. He now describes them as a scam.
Kwon claims that neither he nor his company made any money from the collapse of Earth currencies.
‘Death of companies’
On May 20, South Korean police said they were investigating Kwon’s company, Terraform Labs. Local media reported that the Joint Financial and Securities Crimes Investigation Team was examining the falling currencies.
Before launching Terra cryptocurrencies in 2020, Kwon was allegedly behind another unsuccessful cryptocurrency called BasisCash.
A week before the Earth coins crash, he declared to a cryptocurrency YouTube channel: “95% [das moedas] will die – but it’s always fun to watch companies die.” And just before his $60 billion creation began to implode, he posted to his roughly one million Twitter followers: “I love chaos”.
Over the next three days, in a flurry of tweets, he launched successive plans to rescue the coins, calling on the Terra community to “be patient” and “stay strong”.
But on May 13, he acknowledged on Twitter that the rescue had failed: “I am heartbroken at the pain my invention has brought to you all.”
Now, Kwon has hatched a controversial plan to revive the Terra Luna coin, but leading figures in the cryptocurrency community have criticized his strategy.
Changpeng Zhao, chief executive of cryptocurrency company Binance, described Kwon’s plan as “positive thinking”. Billy Markus, one of the founders of the popular cryptocurrency Dogecoin, also mocked. On Twitter, he said: “My recommendation is to stop trying to bring in new victims to pay for the old ones and go off the air for good.”
Do Kwon and Terraform Labs did not respond to BBC requests for comment.
With additional reporting from BBC News Korea.
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