Terra Classic (LUNC), the original chain of the collapsed Terra (LUNA) ecosystem, is experiencing a capital outflow after the United States Securities Exchange Commission (SEC) formally charged founder Do Kwon.
The capital outflow has resulted in LUNC’s market cap dropping below $1 billion, with value standing at $986.31 million by press time. The value represents a loss of about $54 million from the $1.04 billion recorded in the last 24 hours, according to data by CoinMarketCap.
The shift in market cap is also reflected in the token’s price, which stands at $0.000168. Indeed, in the last 24 hours, LUNC’s valuation has plunged by about 4%.
SEC’s case against Do Kwon
According to the U.S. regulator, Kwon, and his firm Terraform Labs were responsible for misleading investors on several issues, including who was using TerraUSD for payments, and called both the yield-bearing Anchor Protocol and the LUNA token crypto asset securities.
In this line, the SEC is charging Terraform and Kwon with fraud, selling unregistered securities, and selling unregistered security-based swaps, among others.
“Terraform, and Kwon also misled investors about one of the most important aspects of Terraform’s offering – the stability of UST, the algorithmic ‘stablecoin’ purportedly pegged to the U.S. dollar,” the suit said. “UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing,” the SEC said.
According to the SEC complaint, Kwon and Terraform collaborated with an unnamed U.S. trading company to stabilize the value of UST, which had dropped by almost 10 cents in May 2021. The trading firm allegedly purchased UST tokens, and in return, Terraform gave them LUNA tokens.
What next for LUNC?
It is worth noting that since the collapse of Terra, the value of LUNC has largely corrected with news around Kwon, who remains a fugitive. Notably, with an active red notice against him, Kwon is alleged to reside in Serbia as authorities continue pursuing him.
At the same time, Kwon is facing a separate lawsuit in South Korea, where authorities accuse him of violating the country’s capital market laws, a factor he continues to deny.
Overall, it was largely expected that LUNC would collapse back to zero; however, the community continues to implement several measures to save the token. Initially, the short squeeze was a popular campaign among LUNC holders.
However, the LUNC network is receiving support from established crypto entities, development activities, and accelerated burning of excess tokens.
In the meantime, the LUNC community on CoinMarketCap remains bullish about the token. According to a Finbold report, the community projects that Terra Classic would likely trade at $0.0002034 on February 28, 2023.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.+5426
