Inside Terra's Collapse - An Investor's Perspective

Analysing Do Kwons first interview since LUNA crash

To start off with, we are not going into details of LUNA UST here, but the video gives a nice introduction. Instead, I will be reviewing how the interview went. Spoilers ahead! If you haven't watched the interview, we highly recommend you do so before reading this article.

You can check out the full interview here:

So let’s talk about the interview. First of all I’d like to state that I too have lost funds in the LUNA UST crash, but I’m going to try and stay as neutral as possible.

I’ll start by giving a little summary to my analysis of the interview and after that discuss some of the key points to the interview.

Zack Guzmán starts his video by saying he had lost funds in the Luna crash. After watching the interview I imagined it to be quite a lot. His method of questioning pushes Do Kwon into a corner for him to admit he is either a “fraud”, “overconfident '' or the “Elizabeth Holmes of crypto”. His questions have a hint of anger and frustration that ultimately changed the tone of the interview and pushed Do Kwon into the defensive, leaving us with few answers to our questions.

The anger from Zack is understandable as Do Kwon continues to ooze confidence. His answers to questions are more smart rebuttals than actual answers and the lack of empathy or emotion in his responses is rather shocking. As someone who had lost funds in the LUNA UST crash as well, it would have been more satisfying to see Do Kwon showing some signs of remorse. The one thing that does clearly come from this interview was that Do Kwon really was blind to the flaws of LUNA UST, and that he really did not expect the crash to happen.

It is the first interview since the crash, and quite clearly it was still too soon. The interviewer is not able to hide his emotions due to his lost funds, and the wound is still too fresh for the interviewee. Granted we got some insight as to what happened from Kwon's point of view, but I, personally, still have questions.

What follows here is a summary of the interview:

Straight off the bat we get the question that everyone wants answered: “Was this a fraud?” A very aggressive and accusational way to start the interview from Zack Guzmán. Do Kwon dodged the question skillfully and avoided answering the question.

“72 hours, were you surprised to see this happen?” Guzmán asked. Kwon replied that he had never expected it to happen. He had spent 5 years of his life on this project, to see it all happen was “brutal”.

Can we still trust Do Kwon? That’s a tough question. He wants to be trusted but understandably it’s tough. This interview and trying to admit he was wrong is his first step to gain back trust.

20% APY was too high. Guzmán felt that LUNA veered off the planned path by building up a reserve. Theoretically, the LUNA UST coins did not need a reserve. With hindsight, Do Kwon would have preferred to build up a reserve in stablecoins instead. He believed he “had too much faith in Bitcoin”.

Asking how Do Kwon experienced the unpeg. “Sell pressure got worse and worse”. “I’ve been through multiple of these crises, the peg always recovers”. Kwon seemed confident that he would be able to repeat UST. “A mini state of shock” once Kwon revealed that it would be tough to re-peg UST. 8 days without sleep and only one burrito made it tough for Kwon.

Kwon said that he developed an “entertaining alter ego” on Twitter. Admittedly, he himself felt his tweets were “cringe”.

In terms of his personal loss, Kwon lost his life savings. He was so convinced LUNA UST would work that “I bet big, and I think I lost”

From this initial part of the interview, you could tell that Guzmán has some pent up anger in him and he’s trying to force the answers he wants from Do Kwon. Do Kwon on the other hand is well prepped and seems almost robotic in the way he answers. The amount of emotion expressed by Do Kwon is limited and he has an air of confidence still around him. His last answer for example: “I think I lost” it is clear that Do Kwon is not able to face defeat.

The next day, Do Kwon and Guzmán met up for a second interview. The night before, Do Kwon’s close friend and co-founder Daniel Shin had his house raided by the Korean prosecutors.

Starting with a question of the legal consequences, “what are you willing to face”. Once again, Do Kwon rebutted by not fully answering the question and instead returns with: “it’s not what you are prepared to face, it’s a question of how”. It is clear we are back to the same style interview again, aggressive questioning by the interviewer and skilful dodging by the interviewee.

For the first time, we were able to witness some form of emotion from Do Kwon. Guzmán’s “how do you feel about how you impacted him [Daniel Shin] now” seemed to have hit a nerve. A visibly irate Do Kwon responded with “the default answer is that I feel awful”. It seemed as though Do Kwon had been affected by the raid of his friend’s house and was starting to get annoyed with the line of questioning.

The next tough question - “How do you define fraud?”. Do Kwon’s body language confirmed his earlier response, arms crossed, it seemed as though he had had enough. An awkward silence fell as Do Kwon carefully considered his answer. “If you knew something that wasn’t true and argue it was true for personal enrichment, then that is fraud.”

“The primary objective was to build the best decentralized money possible”

“Does that make you an Elizabeth Holmes?” Kwon claimed to not know the full story and maintained that he could not be compared with Holmes. Guzmán tried to explain the parallel between Holmes and Kwon. “Terra’s stable-coin was working beautifully”. Do Kwon’s argument was that UST worked until it didn’t, whereas Theranos never worked but she claimed it did. Guzman clearly liked this analogy as he used it in the intro with an intelligently clipped video to make the user feel like we should see Do Kwon as the Elizabeth Holmes of crypto.

“You knew the risks around de-pegging”, was Do Kwon over confident or lying? Kwon avoided answering but discussed the value of the company making it seemed like he was admitting to being over confident without saying so.

“A mole at TFL, that’s probably a yes”. “The blame is on the person that presented those vulnerabilities.” “That’s me”. For the first time in the interview, Do Kwon admitted to the LUNA UST collapse being his fault. With a little pain in his voice Kwon says “I, and I alone, am responsible for any weaknesses”.

“It wasn’t you?” Guzmán asked. Kwon glanced at camera, clearly insulted and surprised by the question. “I have never shorted a crypto currency in my life.”

Kwon is not leaving crypto any time soon. He wants to leave a LUNA behind with a good name. If not only for his reputation, then for his daughter “Luna”. It’s clear that Do Kwon is here to stay.

“We tried to build the best currency in the world, and it just didn’t work.

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