Terra Stablecoin Issuer Allowed Crypto Whales to Cash Out Ahead of Collapse

It appears that last week’s implosion of the Terra blockchain may not have left all investors holding the bag— the blockchain’s operators allegedly allowed some crypto whales to cash out their holdings ahead of the collapse.

According to a series of tweets from the Luna Foundation Guard (LFG), which was responsible for maintaining the reserve pool to back the Terra stablecoin (UST) and sister token LUNA, the operators of the Terra blockchain allowed select users to cash out their holdings at nearly 100 cents on the dollar. Investors with $2.7 billion worth of face value UST made two transactions to sell their holdings at a bitcoin/UST exchange rate of $32,334 and $35,054, respectively.

Although the exact timing of the two transactions remains unknown, cryptocurrency research company Elliptic found that they took place sometime between May 9 and May 10, when the price of UST traded at around 60 cents in secondary markets, and bitcoin stood between $30,000 and $31,000. The data suggests that certain UST holders were able to exchange their tokens for the bitcoin offered by the Luna Foundation Guard at nearly face value, instead of taking steep loses on secondary markets like retail bag holders were forced to do.

Last week, Elliptic revealed the crypto whales used the Gemini and Binance exchanges as a conduit for the transactions during the failed bailout attempt of the Terra blockchain. “On the morning of May 9th, the LFG announced that it would ‘loan $750m worth of BTC to OTC trading firms to help protect the UST peg’,” the research firm wrote in a blog post. “Terra creator Do Kwon later clarified that the bitcoin would be ‘used to trade.”

However, Elliptic said that “at around the same time, 22,189 BTC— worth roughly $750m at this time— was sent from a bitcoin address linked to LFG, to a new address. Later that evening, a further 30,000 BTC— then worth around $930 million— was sent from other LFG wallets, to this same address.” Shortly after, the combined bitcoins were sent to one Gemini account, and it remains unclear whether the assets were sold in an effort to uphold the price of UST.

“This left 28,205 BTC in Terra’s reserves,” Elliptic said, adding that the remaining assets were subsequently moved to a Binance account via one transaction. “Again, it is not possible to identify whether these assets were sold or subsequently moved to other wallets.” The actions of the two exchanges will likely faced heightened scrutiny to reveal which crypto whales were allowed to liquidate their UST positions at par value while ordinary crypto traders saw their investments vanish.

Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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