For those who’ve not been off the grid for the last few weeks, it is clear that the $3.5 billion of bitcoin created in an attempt to support the TerraUSD (UST) stablecoin was anything but. While untold billions in value were lost when these reserves couldn’t prevent a de-pegging, it’s uncertainty about where they are now and where they would go.
Do Kwon said via Twitter that the related documents to the use of the reserves in the de-pegging event would be released.
3/ Neither I nor any institutions that I am affiliated with profited in any way from this incident. I sold no luna nor ust during the crisis.
— Do Kwon 🌕 (@stablekwon) May 13, 2022
According to Tom Robinson, CEO of the blockchain analytics firm Elliptic, where the digital asset is held and how it was utilised would be necessary for investors who strive to recover the losses through their exposure to UST.
Although there’s no exact time when the documents would be released, Robinson stated that his firm had followed the money: the Luna Foundation Guard (LFG) purchased some 80,394 BTC, worth $3.5 billion, from January to May this year to promote the development of the Terra ecosystem.
Amid the plummeting price of UST at the beginning of last week, LFG said that it would start disposing of its bitcoin reserves and buy UST. According to the announcement on May 9, LFG would “loan $750M worth of BTC to OTC trading firms to help protect the UST peg.” Later, Do Kwon explained that bitcoin would be “used to trade”.
As pointed out by Elliptic, at around the same time, 22,189 BTC (worth ~$750 million) was transferred from a bitcoin address connected with LFG to a new address. On the evening of May 9, an additional 30,000 BTC (worth ~$930 million) was transferred from other LFG wallets to the same address.
LFG/ Gemini (Elliptic)
Within a few hours, 52,189 BTC in total was transferred to an account at the U.S. crypto exchange Gemini.
When having a huge bitcoin reserve, LFG was thought to buy UST to push the price back to $1, which could explain why that reserve was moved to exchanges. However, Robinson said it was impossible to use the blockchain alone to detect if it was sold to leverage the UST price.
This left 28,205 BTC in Terra’s reserves. At 1 a.m. UTC on May 10, all the reserves left were transferred in a transaction to an account at the crypto exchange Binance. Again, it is hard to tell if these assets were sold or later moved to other wallets, Robinson added.
“All we can see is it going into these exchanges. We can’t really see how it’s been used. It might have been sold, it might be being stored on the exchanges, it might have been withdrawn again, and might be an unhosted wallet.”