$LUNA

A South Korean investor who claims to have lost US$2.4 million in the Terra ecosystem collapse earlier this month has been arrested after knocking on Terraform Labs founder Do Kwon’s door and attempting to speak to him about the loss.

Despite not technically trespassing on Kwon’s property, the investor is believed to have broken South Korean law by trying to approach Kwon and will likely face a fine.

Lack of Public Statements Prompted Personal Visit

The investor, a social media personality known as ‘Chancers’, says he was distressed after suddenly losing three billion won (US$2.4 million) in the catastrophic collapse of Terra, after the Terra-based stablecoin UST lost its peg to the US dollar.

I felt like I was going to die. I lost a lot of money in a short period of time. Around $2.4m of my cryptocurrency was wiped out.
Chancers, aggrieved LUNA investor

This combined with virtual silence from anyone involved with Terra regarding the state of the network drove Chancers to attempt to speak with Do Kwon directly.

After finding Kwon’s address online, Chancers travelled across Seoul to confront him in person, while live-streaming to about 100 viewers. Explaining the intention of his visit, Chancers said: “I wanted to ask him about his plans for LUNA; I suffered a huge loss and wanted to talk to him directly.”

Wife Calls Police, Investor Turns Himself In

When Chancers arrived at Kwon’s property, he was greeted by Kwon’s wife who said Kwon wasn’t home and called the police.

The following day Chancers found out police were searching for him and on May 13 he turned himself in to the local station. Despite the fact he didn’t trespass on or damage any property, Chancers now expects to be charged and faces a fine and a criminal record.

“It’s so hard,” Chancers lamented. “I lost a lot of money and now I’m being investigated by the police. I originally served as a civil servant in Korea. But if I am convicted of this case, I may not be able to return to the civil service again.”

Other affected LUNA investors rallied to support Chancers on Twitter, and at least one of them offered some sage advice – albeit in hindsight:

I lost some cash in Luna as well but u Shouldn’t put all the eggs in one basket , and only invest money u r willing to risk . It’s messed up though losing 2.4 mil hope he bouncers back .
— rigel gunaratna (@rigel2105) May 25, 2022

In welcome news, South Korean authorities are also investigating the collapse of Terra to see if any crimes were committed in the lead-up, something many investors will be very interested to know.

The sudden de-pegging of TerraUSD (UST) and the associated breathtaking decline of Terra (LUNA) over the past few days has triggered huge falls across the wider DeFi market, extending beyond those projects directly linked to the Terra ecosystem.

While projects built on Terra have been hardest hit, the damage has spread widely. DeFi tokens on virtually all blockchains are now seeing sizeable declines, even if they have no direct link to the Terra ecosystem:

1/ Extreme volatility produced a series of collateral effects across the Terra ecosystem, primarily derived from the short-term peg deviation of $UST and its impact on the volatility of $LUNA and levers of the Terra protocol. There’s a lot to unpack, so let’s dive in 👇
— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) May 24, 2021

Terra-based DeFi Projects See Massive Declines

According to CoinGecko, the native token for Anchor Protocol (ANC), the largest DeFi protocol in the Terra ecosystem, is down over 90 percent since May 7, falling from US$2.14 to US$0.19 at the time of writing.

Other prominent Luna-based DeFi projects have also taken huge hits. Since May 7 the native token of Astroport (ASTRO), an automated market maker protocol, has dropped 89 percent and Mars Protocol (MARS), an on-chain credit protocol, is down almost 65 percent.

At the time of writing the native cryptocurrency of the Terra blockchain itself, LUNA, is down an astonishing 99.6 percent since May 7, trading at a mere US$0.29. Just over a month ago it hit its all-time high of US$119.18.

The Luna Foundation Guard, the group tasked with stabilising UST’s value, is currently seeking an additional US$1 billion capital to attempt to restore the stablecoin’s peg and potentially save the Terra ecosystem from complete collapse – a goal that is, sadly, beginning to look unachievable:

An $18 billion stablecoin is losing its dollar peg with all the magical chaos of algorithmic stables, with a dash of Bitcoin systemic risk drama.

Here's everything you need to know.

The $UST Depeg Thread:

👇
— jonwu.eth (@jonwu_) May 9, 2022

Contagion Spreads to Connected Blockchains and Beyond

Assets from the Cosmos ecosystem have also seen large declines due to their integration with Terra through the Interblockchain Communication Protocol. CoinGecko shows that since May 7, ATOM is down about 47 percent, while DeFi tokens Mirror Protocol (MIR) and Osmosis (OSMO) are down 73 percent and around 50 percent respectively.

Virtually all DeFi projects across all blockchains have been negatively impacted by this ongoing collapse. According to data from DeFi Llama, total value locked (TVL) across the entire DeFi market has dropped more than 21 percent in the past 24 hours and, since April 4, TVL is down over 48 percent – now sitting at US$120.17 billion, down from US$231.5 billion.

Of the top 10 DeFi projects listed on DeFi Llama, every one has seen seven-day losses of TVL in excess of 27 percent:

7-day losses of TVL experienced across the board. Source: DeFi Llama

In one small piece of positive news for DeFi, earlier in the week Compound Treasury became the first institutional DeFi project to get a credit rating from ratings agency Standard & Poor.