With $619 billion in debt, Lehman Brothers' fall was the biggest business bankruptcy in US history. The liabilities of Lehman Brothers were so substantial that they foreshadowed the Great Recession of 2008–2009, requiring intervention from the Federal Reserve. The collapse of Terra for the crypto space is on the same level of amifications.

By offering a blockchain alternative to the VISA payment system, 

 (LUNA), which had a $41 billion market cap in April, was meant to bring in Finance 2.0. Additionally, Anchor Protocol, one of its primary dApps, attracted consumers with savings account rates of up to 19.5%.

Sadly, the Terra Foundation of Do Kwon relied on the algorithmic stablecoin TerraUSD (UST). Terra (UST) kept its peg to the dollar even though it lacked a true 1:1 cash back (it was using LUNA as collateral, without really having that backup). Terra entered a death spiral after the negative market devalued LUNA, wiping roughly $44 billion in wealth between May 5 and May 12.

Lessons from Terra's fall will last a lifetime, much as Lehman Brothers' collapse led to the 

A balance between responsibility and creativity must be struck in order to safeguard against dishonest actors and experiments that are destined to fail. Treasury Secretary Janet Yellen urged for more federal regulation immediately following Terra's catastrophe.

Obviously, the $40 billion or so wipeout pales in comparison to the trillions in only stocks, but Yellen still feels the need to establish the standards for digital assets in advance.

"At this scale, I wouldn't classify it as a significant threat to financial stability, but they're developing very quickly and present the same kinds of hazards that we have understood about bank runs for decades," the author says.

Most recently, on Tuesday, Sens. Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) proposed the 

, a comprehensive cryptocurrency measure. In addition to classifying stablecoins as "indebtedness," it would also legally designate digital assets as commodities.

Similarly, a depository institution would be required to maintain high liquidity, "not less than 100% of the face amount of the liabilities," in order to back up stablecoins. This will significantly boost investor confidence. However, it's important to remember that CBDCs, or central bank digital currencies, might make the whole stablecoin debate moot.

South Korean prosecutors asked the two cryptocurrency exchanges to freeze 3,313 Bitcoin they believed to belong to Do Kwon, asserting that there had been an attempt to transfer the assets before a warrant for his arrest had been issued.

Do Kwon is sought after in relation to Terraform's demise and the accompanying decline in the value of its Luna and Terra USD stablecoins. Both coins had a total worth of more than $60 billion prior to their collapse. They almost lost all of their value in May, which many analysts believe set off a larger cryptocurrency crash from which we have still not fully recovered.

On September 14, the central court of Seoul issued a warrant for Do Kwon and five other Terra employees. Allegations of violations of the capital markets law in South Korea were included in the arrest paperwork.

Authorities in South Korea informed the international criminal organization Interpol as a result of the suspects' failure to comply with the warrants and their presumed departure from Singapore, where they were issued.

This Monday, the Lyon-based organization issued a "red alert," designating Do Kwon as a wanted fugitive and starting a global manhunt.

Do Kwon has denied trying to withdraw $66 million in Bitcoin days before an arrest warrant was issued for him earlier this month.

The 31-year-old claimed on Twitter that he hadn't used Kucoin or OKex in over a year. “What has been probably the most surprising in all this is the amount of misinformation that gets spread,” he tweeted.

Without innovation, there would be no discussion about cutting-edge smart contracts that will replace banking services or alternative currencies like Bitcoin. Although we should be cautious not to lose sight of the primary motivation for such innovation in the first place—financial liberation—while pushing the edge.

We are on the incorrect path if it leads in the opposite way. Additionally, the narrative of algorithmic stablecoins is not over. The USN was introduced by NEAR Protocol while Terra was dying. But now that we have learned our lessons, investors should view these ventures as dangerous experiments.

Crypto's Fugitive Founder & the Terra Crash

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