Do Kwon Denies Manipulation Allegation in Interview, Report Suggests Kwon Transited via Dubai

The regular members of the Hash are tired about talking about Do Kwon, but Sam is not, so we brought him on to unpack the latest dope on development. Sam, take it away, my friend.

In my defense, I only learned about the tiredness five minutes ago as we were about to go on air, so apologies for that. I'm still excited to talk about it. So, as many of us who are watching this know, there was a huge interview with Do Kwon, who is currently, you know, apparently maybe maybe not on the run, the founder of Terra. It was with Laura Shin, that interview, earlier. I think it was recorded last week, it came out on Tuesday. We're going to listen to a clip really quick, kind of showing how Do feels about whether this was a fraud or whether it was a failure and whether he actually deceived people.

Yeah, so really quick before I throw it to you all for comment, the TLDR here of course is that Terra was that $60 billion stablecoin project that collapsed basically to zero. This is the second time we've seen Do talk to the project, Do the founder, talk about what happened since it all crashed back in May. And here in that clip we just heard, him talk about how he admits and apparently apologizes for deceiving so many people. So there's kind of two cancer questions here: first, did he embezzle money? Did he use this? Did he set it up as a scam in some way? And then the second, did he just deceive people into buying into this project? And that's what this talk is doing. Yeah, I wonder, apparently we've talked about it before, but I wonder if there's much more to say here, and then maybe we can talk about some of the rest of the interview. Zach, interesting to hear this for sure.

So this is, you know, a bit of contrition from Do Kwon, who's been known to be, you know, boastful, loud, and otherwise boisterous on Twitter. So to hear that from him, I think was interesting, right? He believed in this thing and it failed. There were some statements along the way that exposed traders to risk, but he's just as disappointed in this epic collapse as anyone else. I don't ever really know what to make of these statements anymore. They've been going back and forth in terms of how they're approaching sort of the continued ramifications from this fallout. So I just take it with a grain of salt. It's nice to hear the note of contrition in his voice, and I do not doubt that he sincerely is communicating those feelings, but it's really hard to keep track of what we are to make of this situation, which has left investors in bad shape and really triggered a lot of bad things across the crypto markets. People's livelihoods were compromised over so it's the comeback tour is interesting, is certainly worth remarking upon. At this point, it's sort of like I just don't know what to say. There's all these open questions and I think I don't know what the resolution will ultimately be. I saw Jen's hands first and then Will once again as well, so Jen, take it.

Yeah, there was an article in the Financial Times recently, and when I saw it I was like, yes, I have something else to say about Do Kwon than just we're gonna keep talking about Do Kwon. There's a group of 400 retail crypto investors that have a Discord channel. They're called the UST Restitution Group, and they are committed to finding Do Kwon. So they share clues about his whereabouts in this Discord group. One of the people that's part of the group has plans to go to Dubai within the next 10 days. He says that he doesn't think it's going to be that hard to find Do Kwon. I think that this is probably troubling for Do Kwon. If I was him, I would probably turn myself in to the authorities at this point. It must be really scary to think that there are people out there looking for you. I think for anyone who's maybe part of this group or who's looking for Do Kwon, it's important to say don't take justice into your own hands, don't do something stupid. It's all fun and games when you're in a group and you know chatting on the internet, but these are people's lives we're dealing with. So it will be interesting to see what comes out of this. A community has formed. How crypto eccentric that a community has formed around what's happened with UST.

I love the positive take there. There's a community at least doing something about this. I want to zero in on one sound bite that we just brought up there in that little clip, and that's that Do Kwon thought UST would actually be stable. But we have reporting from CoinDesk, as Zach you even contributed to, showing that Do Kwon had been a part of a failed algorithmic stablecoin prior to UST, and that one had failed because the concept doesn't work, right? You can't have an algorithmic stablecoin that has long-term success. There has not been one in history. There's been many attempts at building these things. The one that he was involved with though, Kwon was involved with, was called Basis Cash back in 2020, and now it failed. And that was one of many different ideas. It seems to me that Do Kwon was almost like romantically involved with this idea of a decentralized stablecoin with no actual backing, only using market forces to back the coin. And maybe he was in love with that idea and so he kind of let it go, and then the hubris and just the amount of money that flowed into the token ecosystem itself pushed it to its great heights. And that's sort of what I'm seeing coming out of this whole interview with Laura Shin. But at the same time, like you have a history there and it's failed, so you can't really say that it's okay. Is that gonna throw it up to you? Get your take on that. I gotta get Sam in here. I mean, I was just a bit player in that massive scoop and that was all Sam's doing, so I'm tossing it straight to him. What do you got?

Well, you might be surprised. Thanks Zach, but I might actually push back a little bit on this narrative that Basis Cash played or should play a big role in our understanding of whether Terra was a fraud or not. So Basis Cash, very briefly like Will mentioned, was another failed algorithmic stablecoin project that was not backed by a treasury or a bank or anything like that. Do was pseudonymously, secretly involved in this project. We, Zach did play a role in this, uncovered that right as Terra was crashing a while back. But a lot of people are kind of making a big deal of Basis Cash as evidence that if algorithmic stablecoin, a decentralized stablecoin, you know, Do should have known because of his involvement with this failure that Terra would have failed as well. And I do think that it's fair to point out that while Terra and Basis Cash did share some elements, there was a lot of difference between the mechanisms that the two used to achieve this dollar parity sort of thing. So I guess my overarching point here is that Basis Cash is an important indication not that Terra was definitely going to fail, but that Do knew the risks and deceived people nonetheless. And it's also kind of like an indication to me of this weird rot within the crypto startup community, or at least corners of it, where people are willing to embark on these economic playground experiment type things without disclosing to users that they can crash and burn. Sorry, Zach, is here your finger up?

No, absolutely. Just want to riff on that a little bit. You know, the dream is real of decentralized stablecoins, right? Decentralized stablecoins offer the promise of escaping the censorship risk that asset-backed stablecoins face, right? If you have USDC, presumably there's a dollar sitting in a bank somewhere in the real world, and presumably authorities, be the US or other, can act against those centralized intermediaries, thus compromising some of the foundational decentralized ideals of what is indeed called decentralized finance, perhaps aspirationally at this point by the way. So the dream is there, right? That is the Holy Grail. But it just has yet to work. We've seen all these experiments ultimately fail, and that goes to the question of what Basis Cash is as an indicator. Saying back to you.

I'm gonna shut up after this, but one more thing I didn't want to forget to throw in here is that we got really lucky that Laura Shin shouted out a question that I was able to throw to her based on some reporting for myself and some of my sources where we found, and this goes to some of what we've been talking about about Do and Basis Cash. So in the early days of Terra, Do Kwon and his team forked the chain in order to recover funds for an investor that lost their keys. Apparently Do confirmed that for the first time. We found this a while ago, you can actually see it in their GitHub. This happened. Why is it a problem? Well, when Ethereum forked their chain to recover funds for people, it was a huge giant thing. It's called the DAO. Well, it was called the DAO that got whatever. There's like an entire thing. Look up the DAO hack in 2016. The entire community agreed on what to do. In this case, TFL looks like it unilaterally, with the help of the validators operating the chain, moved funds from one address to another. Do says the community was smaller at the time. But the reason why I bring this up is because it shows that even though like Zach said there is this giant dream of a decentralized algorithmic currency, which I do think is a noble thing when it comes to, you know, if you actually say you believe in crypto, that is a nice ideal to adhere to. But this example shows that Terra, in going against the immutability of their chain and forking it without clear community disclosure, at least this was not a thing that people knew about until this week, it shows that maybe some of that decentralization, algorithm, all that stuff was indeed marketing hype more than a real dream for Do Kwon. So anyway, sorry to throw that one in at the end, but unless it's a good session, we just needed to bring some fresh blood to the ground.

This was good. That was beautiful. Love that.