Shaan explains how he lost around $250K when the Terra/Luna ecosystem collapsed — from his initial $25K buy-in to a $200K VC-priced investment, the brief $750K high, and watching it go to near-zero from a Hawaiian beach. Along the way, he and Sam break down how algorithmic stablecoins work, why Do Kwon’s arrogance may have contributed to his downfall, and how to think clearly about catastrophic investment losses.
Speakers: Shaan Puri (host, presenting), Sam Parr (host, reacting)
The Setup: Hawaii and Zero [00:00:00]
Shaan: I was in Hawaii when it happened. I was on a beach, and then Luna crashed — literally to zero. For a day or two it kind of messed up my vacation, but not because I was doing something — I didn’t even have access to my wallets since I wasn’t home. I couldn’t sell even if I wanted to. I couldn’t do anything.
Sam: Tell me what happened. You told me like six or eight weeks ago that Luna was interesting to you.
Shaan: I actually did something creative about this too. In the last few days I made a long-form piece of content — almost like a John Oliver-style breakdown, fifteen minutes, peppered with jokes, dismantling the whole Luna story. That’s coming out soon.
But here’s the story for those who don’t know.
How Stablecoins Work [00:04:00]
Shaan: Bitcoin gets big — anonymous creator, supposed to be digital gold. Then Ethereum gets big — Vitalik makes money programmable. But both Bitcoin and Ethereum have one major problem: they’re terrible as actual currencies.
You don’t use them for day-to-day purchases. Bitcoin is taxed like selling a home every time you transact. Merchants don’t want it because it could drop 20% overnight. So these aren’t really currencies.
That created the idea of stablecoins — a coin always worth one dollar. The two big ones are USDC and Tether. They work like a safety deposit box: you give them a real dollar, they give you a digital dollar, and they promise your real dollar is sitting in a bank vault when you want it back. Critics don’t love it because it’s centralized — one company, one government can crack it.
So the pro-argument for Terra was: we need a decentralized stablecoin. No bank vault. The mechanism was algorithmic.
Sam: And Do Kwon was the founder?
Shaan: Yeah. Stanford CS grad, starts some mesh networking thing, then pivots hard into crypto. Terra is the company — Terraform Labs. UST is the stablecoin, always supposed to be worth one dollar. Luna is what backs it. Two coins: the stable one and the volatile one that absorbs the shocks. Some technical details that aren’t critical — the point is: no real dollars in a vault.
The Real-World Use Case That Wasn’t [00:10:00]
Shaan: Here’s what made people — including me — excited. Do Kwon came out on stage and said: crypto is full of projects with no real-world use case. We’re different. E-commerce. Every transaction has a 3% credit card fee; we do it at 1%. Pass the savings to merchants and customers fifty-fifty.
They got 27 large e-commerce companies in Korea to use it — including what would be the eBay equivalent. Two million people using their payments app. I was like: a crypto project with an actual use case? I’m in.
Sam: When did you invest?
Shaan: Started with $25K. Then got an opportunity to buy more as part of a VC round — big tier-one crypto investors were buying Luna at roughly a 40% discount to market, around $35-40 when it was trading near $100. It would vest over time, but I was like: I like this project, I get to buy in at half price, and smart money is behind it. I did another $200K.
For a while it looked genius. Luna went from under a dollar to $116. My $250K blended cost basis turned into about $750K on paper.
Sam: Then what?
Shaan: I started noticing they’d stopped talking about the e-commerce use case entirely. Because it kind of didn’t work — merchants tolerated it, consumers didn’t change behavior. Slow growth, not exciting. So they quietly pivoted.
The Anchor Protocol and the 20% Trap [00:18:00]
Shaan: They launched a savings account. Deposit your UST stablecoin and earn 20% interest per year. Bank of America gives you 0.02%. This gives you 20.
Sam: That sounds like a Ponzi scheme.
Shaan: It’s better than a Ponzi. A Ponzi takes customer A’s money to pay customer B. What Terra did: they raised a billion dollars from investors, and they were using that money to subsidize the 20% rate. Like how Uber subsidized your ride when it cost $12 instead of the $28 taxi.
It was customer acquisition spend. Unsustainable by design, but the theory was: we’re buying user growth, and eventually we’ll have enough users that we can raise the fee or lower the rate and the network will sustain itself. They got to about four million wallets. Smart money knew the 20% couldn’t last. The play was: get in early, collect the subsidized rate, and exit before the music stops.
Anybody watching carefully knew the risk. If demand for UST ever dropped, there’d be a death spiral. Luna’s value backs UST. If UST breaks its dollar peg, people lose confidence, sell, that floods the market with Luna, Luna price drops, that causes more selling, and so on — a cascading loop with no floor.
Do Kwon’s Fatal Mistake [00:24:00]
Shaan: Do Kwon had become an egomaniac. He started as a smart, we’re-changing-the-world founder and morphed into a Trumpian figure. Anyone who questioned him got publicly humiliated. He’d call critics “stupid and poor.” He renamed himself “Stable Quan.” A million Twitter followers. A cult of personality.
Then someone on Twitter laid out a specific, detailed 15-step plan showing: if someone with $1 billion of sell pressure targeted Terra at the right moment, they could crack the whole $40 billion ecosystem. They showed the math.
Do Kwon retweeted it and said, essentially: “This is the dumbest thing I’ve ever read. Billionaires, please go ahead and try this.”
Sam: He challenged them.
Shaan: He challenged them. And two weeks later — someone did.
The Crash [00:30:00]
Shaan: A coordinated attack — it’s not confirmed who, but it appears to have been deliberate. Somebody started dumping about a billion dollars worth of UST. The peg slipped to 92 cents. Simultaneously, they were dumping Bitcoin, which Terra held as reserve collateral. Bitcoin price drops. UST breaks peg. People start getting nervous.
It also happened to coincide with Terra moving liquidity between pools — like a house moving where the doors are open. Less shock absorption at exactly the wrong moment.
People started withdrawing from the Anchor savings protocol. Three things happening at once: mass withdrawals, UST sells, Bitcoin dumping. Four billion, five billion in sales in a very short period.
UST went from $1 to 92 cents, then 85 cents, then briefly bounced to 90 — giving false hope — then plunged to 65, 60, 50. Currently around 15 cents. Luna itself went to fractions of a penny.
$48 billion in value wiped out.
Sam: And you’re on the beach in Hawaii watching this.
Shaan: Getting texts from a friend. “Tara’s de-pegging.” Then the price drops like a knife. Nothing I could do — my tokens were locked, and I was away from my computer anyway. I lost about $225K net.
How to Think About It [00:38:00]
Sam: I would lose sleep over that. It would almost be traumatic.
Shaan: It’s not that, for me. And I think it’s because when I make an investment I write down: here’s why I think this is good, and here’s what could go wrong. What could go wrong with Luna was always clear: if there’s a bank run, this thing death spirals. I wrote that down. The risk played out exactly as written.
It’s like having pocket aces and getting cracked. Except Luna wasn’t even pocket aces — it was a flush draw that got beat. I put money in at 60/40 odds, maybe. I lost. That happens.
The other thing: I know there are people who put in a lot more than I did, who put in their life savings. That’s the real tragedy. The rule after this: don’t put more than 15% of your liquid net worth into any single project. All of them have black swan risks.
Sam: Is crypto still the majority of your liquid net worth?
Shaan: It’s more than half now. Was less before — everything cut together. The stock market’s also been brutal. I don’t really log into my accounts right now for mental health purposes. But here’s the forcing function: when things are down, you’re highly motivated to go earn more. The last year and a half — everything inflating, passive returns going up daily — it was almost demotivating to work. Now? Very motivating.
Sam: Same. Just make more money.
Shaan: Exactly. Just make more money.
Note: Terraform Labs CEO Do Kwon was later charged with fraud by U.S. and South Korean authorities. He was arrested in Montenegro in 2023.