The new Terra (LUNA-USD) 2.0 network doesn’t seem to be the big comeback story its parent company, Terraform Labs, had been hoping for. In fact, the project is turning out to be quite the opposite, falling apart in a spectacular fashion less than two weeks into its existence. Investors are increasingly taking out short positions in the new LUNA crypto. Meanwhile, the company behind the project is being plunged into hot water. Allegations of fraud, manipulation and lies abound.
Terra’s collapse last month was not anticipated by most, and it occurred jaw-droppingly fast. Perhaps just as surprising is Terraform Labs’ response to the event. Before the month was through, it had a community proposal approved to create a second network. Terra 2.0 is meant to be the network’s phoenix moment; investors and developers were to band together and save one of the world’s largest projects.
Except, that’s not how it’s turning out at all. After debuting at about $18 on May 27, the coin saw only a brief gain before tanking down to $4. In the days since, the coin is failing to put on a convincing rally, instead slipping further downward. As it stands today, LUNA is trading at just $2.82.
These losses continue to stack up. Meanwhile, investors aren’t buying the dip so much as they are initiating short positions in the coin. As the coin puts together a short gain today, CoinTelegraph notes about $4 million in LUNA transactions across Binance and Bybit. Of this $4 million, nearly $2.5 million consist of short positions. Most investors are anticipating further price declines, and they’re looking to leverage the losses for their own gains. What’s got them feeling so bearish?
Terra Network Flounders and Investors Short LUNA Amid Investigations
Faith in the Terra network continues to waver today, and a series of investigations into Terraform Labs are to blame. Probes are occurring both in the U.S. and the company’s initial home in South Korea. As a result, investors have a bleak outlook regarding LUNA crypto prices.
The Securities and Exchange Commission’s (SEC) probe into the company is not related to the Terra collapse. Rather, the bearish catalyst in the States comes as Do Kwon fails to appeal an earlier investigation into Mirror Protocol (MIR-USD). Regardless of its lack of ties to the broader issue at hand, the news is still a blow to the company already battling investigations elsewhere.
Meanwhile, the South Korean government is laying into the company particularly hard. It is dealing blow after blow to Terraform Labs, fining the company $78 million for tax evasion while also investigating the dissolution of its Korean branch just days before the LUNA collapse. Government entities continue to pile on the turmoil today as they open an investigation over the Luna Foundation Guard’s Bitcoin (BTC-USD) reserves. A police agency in Seoul is determining whether these funds were embezzled after the Guard failed to save the network with them.
As if this legal drama wasn’t enough, Kwon has another thorn in his side: Terra insider “FatMan Terra.” This insider alleges Kwon lied about not owning any Luna Classic (LUNC-USD) and that he held millions of the coins in different shadow wallets. Using these funds, Kwon allegedly manipulated governance proposals to subvert the will of the community.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.