Luna Foundation Guard said the audit disproves claims that Terraform Labs founder Do Kwon embezzled or abused money.
The Terra-linked organisation, founded in January to maintain the dollar peg of the now-defunct TerraUSD (UST) stablecoin, issued a third-party audit. The audit shows LFG spent all of its cash and Bitcoin reserves defending UST’s peg between May 8 and May 16, 2022. This contradicts common suspicion that Terraform Labs co-founder Do Kwon embezzled some of LFG’s finances during UST’s collapse.
LFG said on Twitter on May 16 that it spent $2.8 billion (80,081 Bitcoin and $49.8 million in stablecoins) to protect UST’s peg. Terraform Labs spent $613 million of its own cash to protect the algorithmic stablecoin’s peg, according to the audit.
Terraform Labs released UST, an algorithmic stablecoin. It gained popularity because depositing it in Terraform Labs’ Anchor Protocol gave holders a 20% dividend. UST was algorithmically tied to the dollar, unlike USDC or BUSD.
When market forces drove UST off its peg on May 8, there wasn’t enough collateral to shore up its value, forcing it to enter a death spiral and erase $40 billion from the crypto market. Kwon has been attacked for UST’s unsustainable peg mechanism and for promoting the stablecoin as a “risk-free” asset.
LFG claims its third-party audit confirms all its money was spent defending UST’s currency peg as announced and that its leftover balances are the sole monies left. It also claims the audit reveals law enforcement didn’t steal, abuse, or freeze LFG funds.
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