LUNA Classic: From $40 Billion to a Fraction of a Cent

On 5 April 2022 one LUNA token cost $119.18, and the roughly 350 million in existence were worth about $41 billion, more than many companies in the S&P 500. Five weeks later there were more than 6.5 trillion of them and each was worth a fraction of a cent. In mid-October 2026 a LUNA Classic token, as the wreckage is now called, sells for about $0.00005, according to CoinGecko. The whole pile is worth about $270 million, and Do Kwon, the man who built it, is serving 15 years in a US prison.

Two coins died together. LUNA was the investment token of Terra, a blockchain network built by the Singapore-based company Terraform Labs, which Kwon co-founded in 2018. Its partner was UST, a "stablecoin", a digital dollar meant to be worth exactly $1 at all times. By May 2022 there were about $18 billion of UST in circulation, and about $14 billion of it sat in a savings product called Anchor that paid close to 20% a year.

How the machine was meant to work

Most stablecoins are backed like a money-market fund: for every digital dollar, the issuer says it holds a real dollar or a Treasury bill. UST had no such reserve. It was an "algorithmic" stablecoin, kept at $1 by a swap with LUNA. Anyone could always trade one UST for $1 worth of newly created LUNA, or $1 worth of LUNA for one UST. When UST dipped to 98 cents, traders could buy it cheaply, swap it for a dollar of LUNA and pocket the difference, which pushed UST back up. The UST they swapped was destroyed.

Think of a company that promises its bonds are always worth $100 because it will always swap them for $100 of its own shares, printing new shares as needed. It works as long as the shares are worth something. If people stop believing, every swap prints more shares, which pushes the share price down, which means more shares are needed for the next swap.

Critics said exactly this for years. In July 2021, when the economist Frances Coppola questioned the design on Twitter, Kwon replied: "I don't debate the poor on Twitter, and sorry I don't have any change on me for her at the moment."

The week it broke

Large withdrawals from Anchor and big UST sales began on 7 May 2022. UST slipped below $1, recovered, then slipped again on 9 May. The Luna Foundation Guard, a Singapore non-profit Kwon had set up to defend the peg, held 80,394 bitcoin, worth more than $3 billion. It sold almost all of them trying to hold UST at $1. By mid-May it had 313 left.

The swap did the rest. Holders fled UST for LUNA and sold the LUNA at once, so the system printed LUNA by the billion. Supply went from about 350 million to more than 6.5 trillion in days. On 12 May LUNA fell below a cent and the Terra network was halted. Binance, the world's biggest crypto exchange, suspended trading. Anchor's deposits fell from about 14 billion UST to about 2.5 billion within a week, according to The Block.

The money behind those numbers was personal. Moderators of Reddit's main Terra forum pinned suicide-prevention hotlines to the top of the page. In Seoul, police guarded Kwon's apartment after a man came to the door. Korean prosecutors later said about 200,000 South Korean investors had lost about 300 billion won, roughly $200 million, a figure that covers Korea alone.

The dominoes

LUNA did not fall alone. Three Arrows Capital, a Singapore hedge fund that had put about $560 million into LUNA in February 2022, could not repay its lenders and was ordered into liquidation in June. Voyager Digital, a US crypto broker that had lent it about $650 million, went bankrupt in July. Celsius Network froze withdrawals on 12 June and filed for bankruptcy a month later. By November, the wider crash had helped expose FTX. Bitcoin, which started May 2022 near $38,000, ended the year below $17,000.

The case against Kwon

Kwon proposed a fresh start. On 28 May 2022 a new chain launched, Terra 2.0, with a new LUNA airdropped (handed out free) to old holders. The original chain was renamed Terra Classic and its token became LUNC. The new LUNA traded at about 4 cents in October 2026.

Prosecutors focused on an earlier episode. In May 2021, when UST first lost its peg, Kwon told the public the algorithm had fixed it. In fact a trading firm, Tai Mo Shan, part of Chicago's Jump Trading, had quietly bought more than $20 million of UST under a deal with Terraform. Tai Mo Shan paid $123 million to settle with the US Securities and Exchange Commission in December 2024, without admitting or denying the findings.

Kwon left South Korea in April 2022. A Korean court issued an arrest warrant that September. On 23 March 2023 he was arrested at the airport in Podgorica, Montenegro, with a forged Costa Rican passport. After a long fight between US and Korean extradition requests, Montenegro sent him to New York on 31 December 2024. On 12 August 2025 he pleaded guilty to conspiracy and wire fraud. On 11 December 2025 Judge Paul Engelmayer sentenced him to 15 years, more than the 12 prosecutors had asked for, called it "a fraud on an epic, generational scale", and ordered him to forfeit about $19.3 million.

The token that will not die

Most dead coins go quiet. LUNC got a fan club. In 2022 its community voted for a tax on every transfer, starting at 1.2%, with the tax destroyed rather than collected, in the hope that shrinking the supply would lift the price. Activity fell by more than 90% and the rate was cut to 0.2%, then raised to 0.5% in May 2023. Binance began burning (permanently destroying) LUNC from its trading fees in autumn 2022 and still does it in monthly batches: 858 million tokens in March 2026, according to reports by MEXC and Bitrue.

The arithmetic is brutal. About 5.5 trillion LUNC still circulate. Burning 858 million a month removes about 0.016% of the supply each time. At that pace the pile would take centuries to shrink back to its May 2022 size, and LUNC would still need to rise more than 2 million times to return to its peak.