A third-party audit has revealed that the Luna Foundation Guard (LFG), the non-profit organisation behind Terraform Labs (TFL), spent about $2.8 billion trying to defend TerraUSD’s (UST) peg in May before its collapse.
According to an audit conducted by U.S.-based consulting firm JS Held (JSH), both LFG and TFL made significant efforts to defend UST’s peg to the U.S. dollar before its crash in May.
To ensure accurate results, JSH had access to TFL accounts in cryptocurrency exchanges Binance, KuCoin, and Bitfinex through secure internet-based application programming interfaces (APIs). The APIs allowed JSH to use historical trading data for each account dating back to December 31, 2021.
JSH’s analysis showed that LFG spent all of its reserves, and TFL spent a part of its capital as of then. LFG spent 80,081 Bitcoins (BTC) and 49.8 million Tether (USDT) and USD Coin (USDC), while TFL spent $613 million between May 8 and May 12, 2022.
“While there have been multiple recent failures in crypto, it is important to distinguish between Terra’s case, where a transparent, open-source decentralised stablecoin failed to maintain peg parity and its creators spent proprietary capital to try to defend it, and failure of centralised custodial platforms where its operators misused other people’s money (customer funds) for financial gain.”
JSH’s report validates LFG’s tweets on May 16 following the collapse of the Terra ecosystem, thus dispelling any rumours of embezzlement and misappropriation of funds.
“We hope that this report shows our organisations’ commitment to transparency and the wider crypto ecosystem, and we are more committed than ever to learn from our failure and continue to build systems that are more transparent, decentralised, and resilient,” Kwon added.
Meanwhile, it has been over six months since the Terra ecosystem collapsed, but the crypto market is still reeling from the effect. The crash triggered a contagion that drove several centralised crypto firms into severe liquidity issues and bankruptcy.
~ By William A. Frederick ~