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News Report

Terra LUNA Spent $2.8 Billion Trying to Revive UST Instead of Reimbursing Investors

2 mins
Updated by Geraint Price

In Brief

  • Luna Foundation Guard spent $2.8 billion after the UST de-peg in May.
  • In a third party audit report released by JS Held on Nov. 16, no allegations of wrongdoings have been proved.
  • Crypto influencer FatMan has welcomed the step to release the audit report but has questioned missing trade logs.
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A third-party audit report released by JS Held on Nov. 16 revealed that Luna Foundation Guard spent $2.8 billion after the UST de-peg to come out of the debacle. Notably, it has become clear that the reserves were not used to pay back the investors of the project.

Updated 17 Nov., 11:00UTC: A court in South Korea has approved a request by prosecutors to seize $104 million of assets owned by Terraform Labs co-founder Daniel Shin. It is alleged Shin sold pre-release Terra LUNA at a high price without the knowledge of ordinary investors, reported YTN.

In addition, the report states, “TFL went above and beyond and spent $613M of its own capital to defend UST peg…To defend the UST Price Peg, LFG, TFL, and Jump were initially purchasing UST and LUNA. “

Audit declares no misappropriation of funds

Earlier in May, the algorithmic stablecoin Terra USD (UST) de-pegged from the dollar due to an imbalance. The imbalance is related to the burning and minting mechanism of the ecosystem. The report further declared the tweets put out by LFG during the collapse as accurate concerning the company’s reserve balances.

In response, LFG seems satisfied that the allegations of embezzlement, misuse of funds, and money laundering by insiders have not been proved.

Has the auditor “cherry-picked” logs?

Crypto influencer FatMan has welcomed the step to release the audit report but has questioned missing trade logs. He claims the auditor has “cherry-picked data rather than providing the full story.”

He further argued, “TFL sends Jump BTC, and Jump sends TFL UST… That’s it. No trade logs for this tranche! There are several issues here, as Jump was heavily involved in the Terra ecosystem and could have simply cleaned up their own book. Despite claiming full transparency, this part is omitted.”

In addition, FatMan seems confused with the dumping of 440M UST and $700M+ of LUNA in the process. He questions, “The second thing that struck me as odd was – TFL was selling UST at the same time as it was buying UST!”

Interestingly, FatMan is known to reveal several internal documents as he portrayed himself as an insider to the Terra project. Both during and after the crash. This time, he questions the UST dumping and platform’s de-peg defense mechanism.

FatMan argues, “If the peg was being defended cleanly, there would be a stream of buy orders at predictable intervals. The fact that buys were staggered out erratically, combined with the fact that TFL was *selling* UST at the same time, raises questions. And this is just their known accounts.”

Do Kwon apologies

After the release of the audit, co-founder Do Kwon has come out to state, “For those of you whose minds I have not been able to change, I accept your judgment.” He also goes on to apologize for not communicating the project risks better.

Do Kwon suggests that it will take more than rage and blanket banning of similar protocols to figure out how to stop future failures of this nature. 

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