Luna Foundation Guard says it spent $2.8 billion to defend UST peg

Quick Take

  • Luna Foundation Guard published an audit of its book showing its efforts to defend the UST peg in May.
  • The audit states that it spent $2.8 billion worth of bitcoin and stablecoins to maintain UST’s parity to the U.S. dollar.

Luna Foundation Guard (LFG), a non-profit created in January to grow the Terra ecosystem, has published an audit stating that it spent $2.8 billion in bitcoin and stablecoins to defend the TerraUSD (UST) stablecoin peg during the May collapse.

LFG was set up to defend the UST peg as one of its mandates. The organization held bitcoin, stablecoins and other cryptocurrencies to defend UST’s peg to the U.S. dollar.

The audit was performed by JS Held, according to an LFG statement on Wednesday. The audit report stated that LFG spent 80,081 BTC and $49.8 million in stablecoins, amounting to $2.8 billion in total, to defend the UST peg. This defense happened during the Terra ecosystem's death spiral that occurred in May. At the time, UST lost its parity with the U.S. dollar, triggering a system-wide collapse of the Terra ecosystem — including its flagship crypto, Luna.

Apart from LFG’s efforts, the report also stated that Terraform Labs, headed by Do Kwon, also tried to defend the UST peg. Terraform Labs reportedly spent $613 million of its own funds to defend the UST peg.

The JS Held audit report countered claims that LFG and Terraform Labs embezzled funds during the UST de-peg incident. “The report shows that all LFG funds were spent to defend UST’s peg parity with the Dollar as declared and that LFG’s remaining balances are the only funds remaining,” the audit report stated.

Holding Name Beginning Balance Ending Balance
BTC 80,394 313
BNB 39,914 39,914
USDT 26,281,671 0
USDC 23,555,590 0
AVAX 1,973,554 1,973,554
UST 697,344 1,847,079,725
LUNA 1,691,261 222,713,007

LFG balances between May 7 and May 16. Image: JS Held audit of LFG's books

Reports emerged back in September that LFG had another previously unknown wallet. The report stated the wallet held over 3,300 BTC that Korean authorities were looking to freeze. LFG denied the allegation at the time — and today’s audit report supported LFG’s position, stating that the organization has not moved any funds since May 16.

Kwon commented on the audit report, stating that it was important to distinguish between the Terra collapse and FTX’s bankruptcy.

“While there have been multiple recent failures in crypto, it is important to distinguish between Terra’s case, where a transparent, open-source decentralized stablecoin failed to maintain peg parity and its creators spent proprietary capital to try to defend it, and the failure of centralized custodial platforms where its operators misused other people’s money (customer funds) for financial gain,” said Kwon.

With the audit published, attention could now shift towards compensation efforts for users affected by the Terra ecosystem collapse. LFG previously postponed work on compensation, citing ongoing litigation by aggrieved parties.

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