LFG Audit Reveals Billions Spent On UST Peg

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A third-party audit has revealed that the Luna Foundation Guard spent $2.8 billion to defend the peg of the algorithmic stablecoin TerraUSD (UST). 

Audit Findings Reported

The audit was conducted by JS Held, a Jericho, New York-based consultancy firm. It was discovered that in May 2022, the parent company behind the collapsed Terra ecosystem, Luna Foundation Guard (LFG), spent crypto funds worth $2.8 billion in an attempt to defend the dollar peg of the algorithmic UST stablecoin. In fact, the foundation transferred more than 52,000 BTC from its reserves to Jump Trading. The audit also uncovered that the developer of the Terra blockchain, Terraform Labs spent $613 million trying to defend the peg. 

Were Funds Misrepresented Or Stolen? 

However, as we now know, the efforts were in vain, as UST lost its dollar beg and the entire Terra ecosystem came crashing. Many other crypto lenders, brokers, trading platforms, and exchanges who had exposure to the UST stablecoin or the LUNA token of the Terra platform had to file for bankruptcy protection. It is the most noteworthy event in the industry in 2022, as it resulted in trillions of dollars being wiped off of the entire crypto market. As a result, Korean law enforcement is attempting to freeze LFG’s assets. 

Terraform Labs’ founder, Do Kwon, has even been accused of manipulating Terra’s price. Therefore, the third-party auditing firm was hired by the LFG to investigate any signs of funds misappropriation, embezzlement, or theft. The investigation was also supposed to look into if the funds were frozen or used to benefit insiders. Finally, the audit was also supposed to check if LFG held funds anywhere other than its publicly declared wallets. 

The Jump Issue

Despite listing out the details of the funds spent by TFL and LFG, the results of the audit has raised some questions as the community has claimed that the report is lacking some crucial pieces of information. For example, the report claims that no funds were taken by insiders. However, there is no explanation for why 52,000 BTC were transferred to Jump. A Twitter user has pointed out that as Jump was deeply involved in the Terra ecosystem, it would have used the fund influx to clean up its own balance sheets. The involvement of Jump Trading in these trades has overall been questioned since Kanav Kariya, who is a member of the LFG governing council, is also a co-founder of Jump Crypto, which is Jump Trading’s crypto-arm. Furthermore, Jump has had other token-related controversies in the past.

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