With the crash in the market price of the Terra stablecoin, UST, questions have been asked about what happened to the $3.5 billion that Luna Guard Foundation (LGF) held in reserves. This fund was meant to help forestall exactly what happened to Terra USD, the Terra algorithmic stablecoin that has crashed to $0.004 by Saturday, May 14.
The Terra teams was aware that something like the crash would happen. So they set aside this fund to help in the defense of UST, the ecosystem’s stablecoin. Unlike USDT, UST is not backed by anything.
A Quick Remedial Vote
In the days after the stablecoin crashed, some of the funds that LGF held in its forex reserve were moved. The Terraform CEO, Do Kwon acknowledged this in several posts on Twitter.
1/ The LFG Council just voted to deploy 1.5B in capital (0.75B in BTC, 0.75B in UST) to allay market concerns around UST. Some more context on why and how: https://t.co/TfaAPkzgUJ
— Do Kwon 🌕 (@stablekwon) May 9, 2022
In a recent blog post, the blockchain analytical firm, Elliptic followed the trail of the fund. The report was prepared by Dr Tom Robinson, Elliptic’s co-founder and Chief Scientist.
Between December 2021 and May 2022, the Luna Guard Foundation bought 80,394 bitcoins, which is roughly worth $3.5 billion. This fund, according to Kwon, was meant to be used for the “rebalancing” of the UST. Kwon said that target was $10 billion in BTC, held in reserve.
On May 9, when UST started losing its peg to the dollar, the Lunar team announced that it would use its forex reserve to prop up the stablecoin. On the same day, the funds were moved from the BTC wallets holding them, but the value of the stablecoin continued to drop. This has raised doubts in some quarters that the funds were actually used to support UST.
$750 Million Loan To OTC Platforms
On May 9, Do Kwon announced that the LGF would loan $750 million to some OTC platforms to support UST. Later that day, 22,189 BTC (worth ~$750 million at this time) was sent to an address from the LGF wallet. Hours later, 30,000 BTC was sent to the same wallet from the foundation’s wallet. The second stash was worth $930 million.
The Elliptic report says that later, all the bitcoins totaling 52,189 BTC were moved to the US based crypto exchange, Gemini. The firm said that the coins moved “cross several bitcoin transactions” and it is not possible to ascertain if they were actually sold to balance the price of UST.
Remaining Bitcoins Moved To Binance
At this point, what was left of the LGF forex reserve was 28,205 BTC. The report said that the remaining bitcoins were moved to Binance. It added again that it is not possible to ascertain if the fund was sold to support the falling price of Terra USD (UST).
“At 1am UTC on May 10th, this was moved in its entirety, in a single transaction, to an account at the cryptocurrency exchange Binance. “
It is interesting to note the the Binance founder and CEO, Changpeng Zhao, hinted that the Terra team did not show enough transparency in the course of the crisis. The investors who lost money in the Terra ecosystem may be interested to know if the bitcoins are still in any of these exchanges, Robinson said.