Let's start with the plan to save the Terra ecosystem announced the day before by project creator Do Kwon. He proposes to create a fork of the existing Luna network, with no UST stablecoin, but with Luna coin. The current chain would be called Terra Classic, and its token would be Luna Classic or LUNC.

The new LUNA coins will be dropped to LUNC holders and stackers, remaining UST holders and "important application" developers. At the same time, the LFG fund wallet will not participate in the airdrop, making Terra a "blockchain in full community power".

If the proposal is accepted, the fork of the current Terra network will take place on 27 May, which is next Friday. As Do Kwon responded, major cryptocurrency exchanges are likely to support the airdrop as well.

Binance exchange logo on the shape of Porto

That said, popular exchanges have also lost money on the Terra ecosystem. And at times, the amount of loss is just unbelievable.

How money is lost on cryptocurrencies

To be fair, initially investing in Terra was a very forward-thinking move on Binance’s part. In 2018, the exchange invested $3 million in the project, for which it received 15 million LUNA tokens. According to Fortune sources, when LUNA hit its all-time high in early April, Binance’s investment was valued at $1.6 billion. This information was confirmed on Twitter by the exchange’s founder Changpen Zhao.

And while his company’s losses now exceed the $1.5 billion mark, Zhao is confident that traders and investors who “burned through” their investments in Terra should receive their compensation first. Here is the entrepreneur’s rejoinder, in which he shares his own view of the situation.

To set an example of protecting users, Binance will leave it alone and ask the Terra project team to compensate individual users first. And Binance will receive the refund last, if at all.

In other words, cryptocurrency exchange representatives are willing to be patient and defer receiving coins for the future. Obviously, this is a good initiative also from a reputational point of view, so it is surely worth it.

Binance CEO Changpen Zhao

The refund strategy following the collapse of the UST stablecoin project was previously presented by its creator Do Kwon. However, Zhao’s comment about it was not very encouraging: he doesn’t believe that Kwon will be able to eliminate the consequences of what happened as efficiently as possible. Moreover, the Luna Foundation Guard (LGF) crypto reserves are almost depleted in an attempt to maintain UST parity against the dollar. Which means there is virtually no money left to normalise the ecosystem.

This is all very unfortunate, because until a couple of years ago, Binance was one of the most active and well-placed companies to the Do Kwon team. The exchange helped with the development of Terra, and its representatives have repeatedly stated that the project is one of the most promising in the entire industry. Unfortunately, that didn’t keep it from disaster.

Read also: Cardano's creator has announced the start of a new "crypto-zima". Is this really the case?

Zhao’s desire to recoup the losses of individual investors in the first place is very relevant to the anonymous trader who even tried to break into Do Kwon’s apartment in Seoul the day before. He was arrested by the police after he entered the apartment complex where the Terra creator’s flat is located and then started ringing his doorbell. Kwon’s wife was at home at the time and contacted law enforcement authorities.

Terra founder Do Kwon

Such a desperate move is even understandable: according to sources, Anonymous lost almost $2.3 million in just a few days due to the collapse of LUNA. He confessed to this after being questioned at the police station. According to the suspect, some other investors had losses so enormous that they even committed suicide. Given such devastating consequences, it is unlikely that Kwon will ever be able to rebuild his project, or at least his image.

All he is expected to do is compensate the hundreds of thousands of people who have suffered losses. Even if he somehow manages to pay absolutely everyone back, it is unlikely that new start-ups associated with his name will now attract much investment.

Terra creator Do Kwon


We think this situation is an important reminder of just how risky cryptocurrency investments can sometimes be. Coins as an asset class are incredibly volatile, in addition to being prone to major changes and collapses. Therefore, the challenge for investors is first and foremost to protect their investments. As experience shows, a long move for new projects does not always pay off.

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