Luna Foundation Guard, TFL Spent $3.4 Billion Defending UST Peg: Report

A new audit report reveals that the two entities behind the Terra ecosystem – LFG and TFL – together spent more than $3.4 billion between May 8-12, 2022 to defend the connection to the fallen stablecoin.

The main purpose of the audit was to create “transparency” in defense operations and to dispel reports of embezzlement, misappropriation and theft of funds.

Technical review report

Luna Foundation Guard (LFG) – A fund focused on the Terra ecosystem, disclosed spending $2.8 billion (80,081 BTC and 49.8 million stablecoins) to defend the UST coin. A recently published technical audit was conducted by an external audit firm, JS Held.

The report further stated that Terraform Labs (TFL), the developer of Terra, has spent more than $613 million of its capital on the TerraUSD defense peg system. The paper also notes that LFG is 100% funded by donations from the former to develop “offshore” reserves for the Terra stablecoin.

However, these reserves failed to help the extreme market volatility. As a result of exposure to the Terra ecosystem, many entities in the crypto industry, including lenders, brokers, and exchanges, have had to file for bankruptcy protection.

Terra’s collapse is different from other failures

However, Do Kwon, the controversial founder of TFL, believes that Terra’s collapse is very different from the “recent failures in crypto.” The exec, which received the Interpol Red Notice, said that both TFL and LFG did everything they could to prevent this outcome, while this is not the case with central custody platforms whose operators misused customer funds.

“While there have been many recent crypto failures, it is important to distinguish between the case of Terra, where a transparent, open-source decentralized stablecoin failed to maintain peg parity and its creators spent equity trying to defend it, and the failure of decentralized custodian platforms where their operators misused funds. others (customer money) for financial gain.”

Kwon has faced intense scrutiny from regulators around the world. But he has consistently criticized “misinformation” in the media and downplayed serious allegations by the South Korean authorities as well as Interpol.

Terra’s creator maintained the protocol’s “weakness” design that led to its demise in the face of “brutal” market conditions and dismissal of insider fraud reports. He recently revealed his plans to meet with authorities in Europe soon.

The review comes on the same day that South Korean prosecutors investigating the collapse of the algorithmic stablecoin raided the headquarters of Chai, the domestic payments technology company founded by TFL founder Daniel Shin.

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