LUNA Classic: From $40 Billion to a Fraction of a Cent
$41 billion evaporated in 72 hours. The death spiral that triggered a market-wide collapse and sent its creator to a US courtroom.
LUNA was supposed to be the future of money. Its algorithmic stablecoin UST held a $1 peg through a mint-and-burn mechanism with LUNA. When it worked, it looked like magic. When it failed, it was the fastest destruction of wealth in crypto history.
In May 2022, a large UST sell-off broke the peg. The algorithm responded by minting billions of LUNA to restore it. But each new LUNA token diluted the price further, triggering more selling, which required more minting. A textbook death spiral that multiple analysts had predicted. Do Kwon had mocked those analysts publicly.
LUNA went from $80 to $0.00001 in 72 hours. $41 billion in market cap vanished. Anchor Protocol, which offered 20% APY on UST deposits, collapsed with it. People lost retirement savings. College funds. Life savings. Reports of suicides followed.
The collapse did not stay contained. Three Arrows Capital, a $10 billion hedge fund heavily exposed to LUNA, could not meet margin calls. Its failure triggered Celsius, Voyager, and BlockFi to freeze withdrawals. The dominos fell all the way to FTX five months later. LUNA was the first crack in a chain that broke the entire industry.
Do Kwon tweeted about building "LUNA 2.0" days later. The community was not amused. He fled South Korea, traveled on fake passports, and was arrested in Montenegro in March 2023. After a year-long extradition battle between the US and South Korea, Montenegro extradited him to the United States in January 2025. He pleaded guilty. On December 11, 2025, a federal judge sentenced him to 15 years in prison and ordered over $19 million in forfeiture.
Separately, Terraform Labs settled with the SEC for $4.47 billion in June 2024. The company agreed to wind down permanently. LUNA Classic still trades at fractions of a cent - around $0.000043 as of early 2026 - kept alive by a stubborn community running burn mechanics. Binance is on its 43rd LUNC burn batch. The token that destroyed $41 billion has a market cap of about $233 million. In crypto, even corpses twitch.
The Aftermath
LUNA's collapse triggered a chain reaction that took down 3AC, Celsius, Voyager, BlockFi, and ultimately FTX. Do Kwon was sentenced to 15 years on Dec 11, 2025 with $19M forfeiture. Terraform Labs settled with the SEC for $4.47B and shut down. LUNA Classic still trades at ~$0.000043 with a $233M market cap.
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