Prominent hedge fund manager Bill Ackman says that Terra is a crypto version of a pyramid scheme
In a recent Twitter thread, billionaire Bill Ackman claims that the imposing of Terra was in the cards since it was a pyramid scheme.
The CEO of Pershing Square Capital Management explains that investors were promised returns of up to 20% backed by the token whose value depends on the number of new buyers.
Since there is no fundamental underlying business, the collapse of the token was obvious.
Once the supply of sellers overwhelmed buyers, the price of the LUNA token crashed to virtually zero, leaving a slew of investors in the dust.
Terra was able to become so big because of hype around cryptocurrencies in 2021, Ackman says.
While the billionaire acknowledges that blockchain is a promising technology, he warns that Ponzi schemes like Terra pose a threat to the entire cryptocurrency industry.
He adds that such failed projects may lead to harsh regulations that will shut down “the good and the bad.” Hence, he believes that the industry should self-regulate other projects without any underlying value.
As reported by U.Today, Terra co-founder Do Kwon proposed launching a fork of the failed blockchain in order to revive the project. However, roughly 90% of the community members have voted against the proposal.
Meanwhile, the collapse of Terra has already attracted plenty of regulatory scrutiny. Earlier today, Yun Chang-Hyun, a politician from South Korea’s ruling party, called for a hearing on the collapse of the TerraUSD (UST). According to Yonhap, South Korean regulators have also asked exchanges to report transactions linked to the embattled blockchain project.
Last week, Treasury Secretary Janet Yellen said that stablecoin-related risks were growing after the implosion of UST.