Terra Founder Do Kwon's 2021 LUNA Cashout Raises Questions About UST Collapse

Terra Founder Do Kwon's 2021 LUNA Cashout Raises Questions About UST Collapse

Recent investigations into Terra founder Do Kwon's financial activities in 2021 have uncovered significant details about the cashout of 3 million LUNA tokens, raising questions about the stability of the UST stablecoin and the transparency of Terra's operations.

Unlocking of LUNA Tokens and Conversion to UST

In 2021, Do Kwon began unlocking 3 million LUNA tokens monthly for Terraform Labs (TFL), promising transparency reports that never materialized. These tokens were converted into UST using specialized bots and then dumped into MIM and Curve pools, amounting to $300 million monthly. The funds were allegedly for "operating costs," but the lack of transparency has led to criticism.

Project Dawn and TLF Genesis Wallet

Additionally, 5 million LUNA tokens were unlocked for Project Dawn in 2021, distributed by the TLF Genesis Wallet, valued at $150 million. The community was assured that the 3 million LUNA tokens allocated for "operating costs" would be backed by transparency reports, which were never provided.

Implications of the Cashout

The cashout was intended to cover expenditures, including employee token distribution. However, the absence of transparency reports has raised suspicions. Screenshots reveal that Terra Labs liquidated hundreds of millions of UST using the Abracadabra UST leverage farm, further imbalancing the MIM-UST curve pool.

Role of Bots and Ethereum Transactions

Bots played a crucial role in selling and burning LUNA into UST to cash out large sums. Once enough UST was collected, the funds were transferred to the Ethereum mainnet into a specific wallet. This process involved selling UST with $100 million MIM from Daniele Sestagalli's wallet to maintain the MIM-UST pool ratio.

Criticism and Potential Impact on UST Collapse

FatMan criticized Do Kwon, suggesting that the UST collapse in May 2022 could have been caused by these massive cashouts. The use of bots to manipulate the MIM-UST pool and subsequent cashouts on exchanges have drawn scrutiny, with critics questioning the ethics and transparency of Terra's actions.

This revelation has significant implications for the cryptocurrency community, highlighting the importance of transparency in decentralized finance (DeFi) and the potential risks of unchecked financial operations.