Note: I tried my best to objectively capture what Do Kwon said / meant, but I do think he’s an unremorseful criminal who should be in jail. So clearly I am biased.
Guest: Do Kwon (DK) – Terra / Luna founder
Host: Laura Shin – Unchained
Since last year, hasn’t been living in South Korea (SK)
Doesn’t understand how Red Notice works very well, has asked for clarification but hasn’t heard back
Disappointed that SK prosecutors are attempting to create new regulations through enforcement actions
DK hasn’t seen copy of the arrest warrant; Laura mentions the PDF is posted online, but DK says he hasn’t seen that PDF
“We are cooperating” with all the document requests (from SK govt)
Laura: Are you in Singapore now?
Doesn’t want to talk about his location for personal security – people broke into his apartment building in Seoul (both reporters and private citizens), personal threats
Laura: What about claims that Korean authorities froze $67M in his funds
“Too many things that are not true”
Went through proper procedures to pay residual taxes, hasn’t used KuCoin or OkEx “as far as I can remember”
“LFG only holds 313 bitcoin”
Hired onchain analysis company, will provide report shortly to give more clarity – should be “in next couple weeks”
Laura: Do you feel any remorse?
“Got carried away”, should have held to stricter standards
In personal life “quite a bit of introvert”
Community pull for him to be more frank, transparent
Over time Twitter became his medium to do this
“Largely for entertainment value”
“It is quite cringe” – worthwhile to keep up for record keeping and posterity
Laura: many people lost life savings, Taiwanese man who committed suicide, what do you want to say to them?
“My responsibility alone”
Hundreds of thousands if not millions who used Terra – “I own up to that responsibility fully”
“It’s not easy to live with”
In the process of people dealing with this grief, there were lots of accusations of fraud / theft — “important for them to have correct representation of what happened”
Crypto founder for last 5 years
“Even to this day, I’m proud of work we did…values we tried to defend”
Laura: SBS News reported Do Kwon moved Singapore profits to Virgin Islands; family used proceeds to purchase apartment
“I do own an apartment in Seoul”
Moved TFL corporate structure from Singapore to BVI, no funds were transferred
People who came on Korean shows that claimed to be Terra developers “were literally just interns”
Launched UST early 2021, at that time 20% was not extremely high yield, lots of 3-4 digit Defi yields
Internally, there were questions during launch that the yield wasn’t attractive enough!
Terra’s whitepaper doesn’t describe tokenomics – intentionally written in high level academic way – why decentralized algo important for industry
Didn’t initially consider need to have a stablecoin reserve
All-time high for UST/USD was $1.09
Would use SDT reserves to bring down UST price
Also made SDT stable coins available to ecosystem apps for initial / bootstrap liquidity
Initially used market operations to maintain peg – but gradually became “negligible % of overall volume”
UST became one of largest liquid stable coins, Luna was one of largest PoS networks
Eventual goal was UST would be backed by every large and promising crypto (eg, BTC)
Laura: there’s onchain evidence of cashing out $2.7B into USDT (via MIM), sent to Binance, Huobi, others
“Definitely did sell UST and Luna to fund operations”
“$2.7B or anything to that effect…was not used to cash out or anything like that”
Laura: why continue to claim Chai brought millions of users to Terra, when that arrangement had ended
2020 – Daniel Shin (ex cofounder) left TFL to focus on Chai full-time, while Do left Chai which he also co-founded to focus on TFL
“Consider myself the more active cofounder in building both of those companies”
In terms of Chai, limited visibility into its user data, “I should have been more consistent in how I fact checked numbers”, “definitely shortfalls on my part there”
Laura: Sam Kessler claims that Terra unilaterally re-awarded coins to an investor who lost private key (Translink capital) without discussion
“Terra can’t unilaterally decide to do an upgrade”
“Validator driven process”
Laura: Basis Cash failed, why so confident about Terra still?
Saw TFL as accelerator to create lots of different apps – Pylon (yield), Anchor, Mirror
Initial Anchor team (5-6 people) spent a lot of time yield farming DeFi – Yam, Yearn – DK first got into DeFi through this
These early devs wanted to do implementation of Basis protocol and launch it anonymously
They assumed Rick & Morty pseudonyms – asked him to be “Rick”
“Terra pre-dates Basis Cash”
“Currency failure of developing nation isn’t because monetary policy, it’s because underlying economy is weak”
“Don’t think there’s any underlying problem mechanism wise, it’s because no solid economy built on top”
In terms of Basis Cash, “essentially all I did was join Telegram rooms and shitpost”
“I had no involvement in those things”
“It was an educational experience…why pseudonymous founders makes sense in crypto”
“Basis Cash isn’t something he designed or operated…it’s something he encouraged”
Laura: Have you ever anonymously founded other projects?
“No”
Do’s description of de-pegging event
May 7, Singapore time – UST had de-pegged 2.5%, large trades against Curve LP, depleted pool
Didn’t think it was a serious problem
Over time the disparity got worse and worse
Patterns of large sells against UST
Sentiment was catching on, rumors, runaway situation
Deployed a few hundred $M to market maker, bought a bunch of UST – re-pegged briefly, “then the sells just got worse”
Luna falling, people dumping
War room of OGs, tried to raise fresh capital to buy more UST
Midnight fundraising round – got leaked – even more shorts piled up
Once Luna market cap fell below certain level, the rescue fundraise became untenable
Laura: 5 months later, why no accounting or trading logs of those market makers / peg defense?
“Bound to some confidentiality”
“Lot of transactions… finally in closing phases [on this report to be released]”
“I haven’t personally taken any tokens from TFL from May 2020”
Laura: Monthly unlock tokens (3M+, up to $300M USD value per month) were going to employees / operating expenses?
“Contract obligations and things to that effect”
Laura: After South Korea passport invalidated, what will you do?
“I’m not using it anyway”
“I don’t feel comfortable talking about location”
Laura: When will USDT / USDC disbursements occur?
“Until litigation resolved, not able to distribute tokens”
“Don’t have a lot of clarity on how long process will take”
“Not a refund…more of a goodwill effort” [to re-distribute the 313 BTC they’re still holding]
Laura: How do you feel about direction your life has taken?
“Never about money or fame or success…I like making toys, simply tinkering with things”
“I enjoy building furniture…sometimes cook”
“What happened with Terra wasn’t a scam, it was a massive market failure”
“Believe in need for decentralized stable coins more than anyone else”
“I’m 31 and I would still love to contribute”
“I get to do a lot more engineering”
Laura: Anything you’d do differently?
“Maybe building onchain BTC reserves earlier, more significant”
“Being less aggressive less joking on Twitter”
“Next attempts at decentralized money will look a lot different”
“Without [decentralized money], what are we even doing here?”
“Deeply regretful of how things panned out with UST” but developers need to keep building
Laura: Anything else?
“Working on lots of different things…highly experimental”
“Not working on Luna Classic at all”