Crypto villains of 2022: Do Kwon and Su Zhu go from kingpins to outcasts

If there was a year for the cryptocurrency markets to prove that Newton’s law of universal gravitation was right, 2022 was it.

Cracks were already starting to show when after last November’s unprecedented bull run to US$69,000, bitcoin (BTC) began losing value, fast.

By the new year, 30% had already been knocked off the market, but for those who’ve been keeping tabs since, you’d know that was just the beginning.

As I type, bitcoin is valued at only a quarter of what it was just a year ago, while the cryptocurrency markets as a whole have lost a whopping two trillion dollars in capital .

What has risen has indeed collapsed, taking away dozens of cryptocurrency businesses, investors, and bystanders along the way.

Thanos-level villains have been created, as well as heroes. Plus a few fugitives for good measure.

What else can we do but grab some eggnog and dive into the key events of this most tumultuous year.

terrible two

In a year of countless scandals, Terraform Labs was the real trailblazer.

Once upon a time (i.e. earlier this year), Terra LUNA and the stablecoin UST were two of the biggest altcoins on the market, distributed by Singapore-based developer Terraform Labs.

The UST was designed to be firmly pegged to the US Dollar to enable trading in the crypto markets with unpredictable price volatility. LUNA, on the other hand, acted as a kind of stabilization mechanism for UST.

Their usefulness has made them extremely popular among investors and they have become a central part of the wider crypto ecosystem.

There was only one problem: UST’s pegging algorithm wasn’t worth the keystrokes it was written with.

LUNA and UST had a combined market value of US$45 billion on May 9, 2022. A week later, they were virtually worthless.

Thousands of people have lost millions, and Terraform Labs head Do Kwon has become an international pariah.

To date, his whereabouts are unknown and he has so far refused to cooperate with authorities in his native South Korea who want him on possible violations of capital markets laws.

Even Interpol got involved, but his location remains a mystery, with some claiming he has fled to Serbia.

Kwon even had the audacity to launch LUNA 2.0 in June. It has since collapsed in value by 80%.

A poisoned arrow

Terra’s collapse was widely seen as the first domino in a chain of events that has yet to be broken.

But the June liquidation of Singapore-based crypto hedge fund Three Arrows Capital kicked things into a whole new gear.

The blatant incompetence of founders Su Zhu and Kyle Davies was laid bare in bankruptcy filings online leak by the New York consulting firm Teneo.

The massive report, filed by joint liquidators Christopher Farmer and Russell Crumpler in the High Court of the British Virgin Islands, contained a host of revelations about serious mismanagement that led to the collapse of the Singapore-based crypto fund.

Among the most egregious of the affidavit’s rap sheet were the elaborate purchases of co-founders Su Zhu and Kyle Davies.

While routinely ignoring any correspondence attempted by the company’s litany of creditors, Zhu and Davies allegedly made a down payment on a US$50 million superyacht.

The tome listed a litany of high-value margin calls against Three Arrows Capital, describing a debt black hole from which the hedge fund had little hope of emerging.

Unfortunately for 3AC, the company had US$670 million exposure to Terraform Labs and the fund was “long leveraged everywhere and getting called margin,” according to a sworn statement from Danny Yuan, the company’s chief executive. cryptocurrency trading company 8 Blocks Capital. .

“Instead of responding to margin calls, they ghosted everyone,” Yuan said.

After being in obscurity for months, Su Zhu recently started tweeting again, in an apparent first step to orchestrating a comeback in the form of a series of video podcasts.

Where the podcast will be recorded from is unknown: neither Zhu nor Davies cooperated with the bankruptcy proceedings, and neither returned to Singapore to deal charges by the Monetary Authority of Singapore.

And the beat continues

That only brings us to July and unfortunately things are just getting started.

There were plenty more crypto baddies in the works for 2022. Stay tuned for part two.

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