By: André Jerusalem

One of the most disastrous events in the history of the crypto market was the recent collapse of the Terra (Luna) project, which generated nothing less than the loss of around US$1,400,000 that were deposited in the project.  

 Due to the large proportion of losses, the US Securities and Exchange Commission (SEC) is investigating what happened with Luna, since thousands of investors were affected, and it is not uncommon to find testimonies from investors who lost hundreds of thousands of dollars with the crash (or – apparently – scam). 

 Before the project ended, in September 2021 the SEC issued a subpoena to Luna's CEO, South Korean Do Kwon, demanding that he demonstrate that Terra tokens (the protocol used by Luna) were not registered illegally or illegitimately. The subpoena was issued based on findings from the website CryptoBasic.com and were carried out to understand Do Kwon's connection with the Mirror Protocol, which is a creation of Terra Labs used to mirror other assets traded on common markets, such as shares of large companies, on the Terra platform. 

 In response to the SEC, Do Kwon filed a restraining order to avoid providing such information, but he refused to appear in court when the court ruled in favor of the SEC to compel him to provide the requested information. However, that was before the project collapsed and all the spotlight turned on Do Kwon and Luna. 

 Since Terra Labs was based in South Korea, in early June, shortly after Luna's collapse, the local government imposed a restriction prohibiting any Terra employee who wanted to leave the country from doing so, as investigations into the project's collapse are ongoing. However, Do Kwon is not in either South Korea or the US, and his whereabouts are uncertain. 

 Despite the fact that the Luna 2.0 project (“Luna Classic”) was launched a few days ago, it was even listed on several exchanges, including Binance and FTX. However, due to the scale of Luna’s collapse, the SEC remains focused on investigating the incident to hold those responsible accountable and prevent new frauds of the same type, sending a clear signal to the crypto market that it will increasingly act to monitor this business environment, which is still poorly regulated. 

 In Brazil, there is still no public information about any investigations that may be underway related to the incident.