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The editors of GetBlock Magazine collected the most important news after the collapse of the LUNA token and the UST stablecoin.
May 20
Terraform Labs CEO Do Kwon made changes to his proposal to restore the Terra blockchain during an on-chain vote. The first change is aimed at reducing the distribution of LUNA (LUNA) 2.0 tokens among holders of the TerraUSD (UST) stablecoin, who bet their tokens on Anchor when the asset value collapsed. Their share of distribution was reduced from 20% to 15%.
Kwon then proposed to increase the initial number of free LUNA 2.0 tokens from 15% to 30%, and the remaining 70% would be blocked for a two-year period. Previously, the ratio was 15% and 85%, respectively.
Anonymous analyst Terra FatMan stressed that making changes to the proposal should be accompanied by a new vote.
May 19
The G7 countries called for accelerating the “development and implementation of consistent cryptocurrency regulation” following the collapse of the Terra (LUNA) ecosystem. The G7 appealed to the Financial Stability Board, which is responsible for developing the document. The head of the French Central Bank, Francois Villeroy de Gallo, said at a meeting of G7 leaders:
“What has happened in the recent past is a wake-up call for the urgent need for global regulation.”
He added that these issues will be discussed at further meetings of the G7. The group consists of Canada, France, Japan, the United Kingdom, Germany, Italy and the United States.
One of the well-known sponsors of Terra is the South Korean venture fund Hashed, which lost $ 3.5 billion in unrealized profits due to the collapse of the terraUSD (UST) stablecoin and the LUNA token that supports it. The foundation participated in Terra’s 2021 funding round, in which it helped raise $25 million (according to Crunchbase). The fund did not comment on the situation around LUNA and UST. Hashed added 49.9 million LUNA to the stacking.
Research firm Delphi Digital admitted that in the first quarter of 2021, their venture capital fund purchased a small number of LUNA tokens worth 0.5% of the net asset value (NAV) at the time. This position grew as LUNA’s value increased, and the foundation ramped up its assets, including investing $10 million in the nonprofit Luna Foundation Guard (LFG), created to support the Terra ecosystem, in February 2022. Representatives of Delphi said that the company bears “large unrealized losses.”
Representatives of the Avalanche blockchain recalled that LFG has 1.97 million AVAX tokens in reserves, which are now blocked for a year. That’s 0.9% of AVAX’s weekly trading volume. These tokens were purchased to secure the UST stablecoin. Taking into account all the circumstances, if suddenly LFG is going to sell AVAX tokens, the platform is ready to discuss with them a strategy for selling this volume.
In South Korea, a special investigative organization was recreated to investigate crimes in the field of finance and securities. As its first case, the organization investigates the collapse of Terra.
The interdepartmental group was established in 2013. It included employees of the prosecutor’s office and employees of regulatory bodies in the fields of finance and securities. The team, nicknamed Yeouido Grim Reaper ( The Grim Reaper ), carried out 346 arrests in 965 cases, mostly related to market manipulation.
The Reapers were disbanded in January 2020. The team was partially revived in September 2021. However, it did not have the authority to conduct an investigation, but only to facilitate cooperation between the prosecutor’s office and the financial authorities.
May 18
In-house lawyers at Terraform Labs began leaving the company. According to LinkedIn profiles, Chief Counsel Mark Goldich, General Counsel for Litigation and Regulation Noah Exler and General Corporate Counsel and Lawrence Florio left Terra in May 2022. Concerned Twitter users are calling for a lawsuit against The co-founder of Terraform Labs, Do Kwon.
The head of Galaxy Digital, Mike Novogratz, said that the reason for the collapse of the UST and LUNA rates was the global macroeconomic situation. He added that the collapse of Terra “undermined confidence in the field of cryptocurrency and DeFi.” The entrepreneur said that Galaxy invested $ 400 million in Terra because of “reliable fundamental indicators.” Back in January 2022, the head of Galaxy Digital made himself a tattoo with LUNA after his company invested in the project. In his appeal, Novogratz writes that his tattoo will be “a constant reminder that venture capital investing requires humility.”
South Korea’s internal revenue service has accused Do Kwon and terraform Labs, a company he founded, of evading income and corporate taxes worth more than 100 billion won ($78.4 million).
Near Foundation, a nonprofit, has called on app developers in the Terra ecosystem to join its team.
May 17
The South Korean authorities demanded parliamentary hearings on the collapse of the UST. The representative of the ruling People’s Power Party, Yoon Chang-hyun, said that Do Kwon should address the parliament and explain the reasons for the incident. According to Yoon Chang Hyun, the behavior of crypto exchanges during the collapse of the stablecoin also raises many questions. He stressed that while the meeting is postponed, investor losses continue to grow.
90% of members of the Terra community opposed Do Kwon’s proposal to conduct a hard fork of the network during the preliminary voting. Also in the comments, many supported the plan to burn the native token of the LUNA blockchain. The user who published the survey noted that the speedy clarification of the opinion of the community will allow “not to waste time.”
Binance offered cooperation and assistance to projects based on the Terra blockchain in the transition to BNB Chain.
May 16
Polygon Studios CEO Ryan Wyatt said his team is working closely with developers of projects on the Terra blockchain to help them transition into the new ecosystem. Some projects in the affected network have already closed their protocols, these include Kujira, Stader Labs, LunaBulls, LunarFlip and Hero NFT. Polygon has also been joined by the Juno Network (JUNO). Representatives of the protocol proposed to allocate 1 million JUNO tokens to developers of projects on Terra to switch to their platform.
Representatives of the LFG confirmed the sale of bitcoins for $ 2.3 billion to support the UST stablecoin. The organization has 313 BTC, 39,914 BNB, 1.9 million AVAX, 1.8 billion UST and 222.7 million LUNA (of which 221 million are staked). LFG officials said they hope to use the remaining assets to compensate UST holders, primarily the smallest.
Do Kwon offered to carry out a hard fork of the network. According to Kwon’s plans, the new chain will not be tied to the UST stablecoin, and the old one will continue to exist under the name Terra Classic (LUNC). The initiative aims to save the blockchain ecosystem.
Binance CEO Changpeng Zhao said that the exchange lost more than $ 1.6 billion in unrealized profits from investments in the LUNA token after the collapse of its rate.
May 14
Singaporean investors LUNA and UST have filed a police report against the CEO of Terraform Labs.
May 13
The Terra blockchain has temporarily suspended its operations to develop a new recovery plan. The issue of the native token Terra reached 7 trillion. The UST stablecoin never managed to restore its peg to the dollar, and the price of LUNA collapsed to almost zero – $ 0.00002.
The Terra community decided to roll back the network before the UST collapsed. Also, users proposed to eliminate the company Terraform Labs, return the UST collateral and develop a new mechanism for the LUNA token.
Binance has resumed spot trading LUNA/BUSD and UST/BUSD.
After the update, Representatives of Terra reported that the blockchain resumed the production of blocks. Validators decided to disable intranet swaps and close IBC channels.
Do Kwon made a proposal to restore the Terra ecosystem. Kwon’s idea was to pay compensation to UST and LUNA holders who were unable or unwilling to sell their assets during the price crash. He proposed that validators restart the network with 1 billion tokens distributed among LUNA and UST holders, as well as a community pool to fund future development.
VanEck and 21Shares have suspended support for their exchange-traded funds (ETPs) on LUNA.
Analysts at Elliptic published an investigation according to which LFG reserves were withdrawn to crypto exchanges and then disappeared without a trace the day after the beginning of the collapse of UST and LUNA rates.
May 12
Cryptocurrency exchange Binance announced the exclusion from the listing of perpetual contracts COIN-Margin for the LUNA token. Users were advised to close all open positions before delisting in order to avoid automatic execution. Representatives of the platform stressed that they reserve the right to change the maximum leverage and margin levels of LUNA contracts in the future without additional notice.
Crypto exchanges Bybit, BitMEX and Phemex have joined the delisting of instruments on LUNA.
Terra said the platform will destroy 1,388,233,195 UST to restore the pegging of the stablecoin to the dollar, this amount was approximately 11% of the tokens in circulation. LFG has issued 240 million new LUNA tokens to protect the network from “taking over control,” the organization said.
British blogger KSI reported that he lost $ 2.8 million on the collapse of the LUNA token rate. Despite the hyperinflation, the blogger does not plan to sell his assets. He said he would wait for the exchange rate to be restored.
On the evening of May 12, the Terra blockchain was rebooted for an update.
May 11
The Terra team has begun working with the community to restore the UST’s peg to the U.S. dollar. There was a proposal to increase the base pool from 50 million to 100 million SDR and reduce its recovery period to 18 blocks. 67.08% of members of the Terra community voted in favor of the initiative. 325.76 million users took part in the voting.
The SDR is a reserve asset that was created by the International Monetary Fund in 1969. The price of the SDR is determined by the exchange rate of the US dollar (41.73%), the euro (30.93%), the Chinese yuan (10.92%), the Japanese yen (8.33%) and the British pound sterling (8.09%).
South Korean exchange Bithumb reported on the potential delisting of LUNA.
“Due to the strong fluctuation in the price of the digital asset LUNA due to the instability of the peg of the dollar value of the algorithmic stablecoin of the Terra project, it is designated as an investment warning object to protect investors,” representatives of the exchange said.
Do Kwon unveiled a plan to restore the UST stablecoin. It involves an increase in the emission of the LUNA token. Kwon supported the community’s proposal to increase the base pool from 50 million to 100 million SDR.
May 10
The media reported that LGF wants to raise another $ 1 billion to support its UST stablecoin. According to sources, the organization was negotiating with potential investors. On the same day, it became known that LGF sold all its reserves of BTC (according to the analytical company Glassnode).
May 9
On this day, LFG representatives said that they would allocate $ 1.5 billion in BTC and UST to market makers to maintain the UST/USD peg. However, this did not help the stablecoin.
May 8
The UST rate fell to a minimum of $ 0.99, the stablecoin lost its peg to the dollar. At the same time, the value of the LUNA token decreased by more than 8%.
On the same day, Terraform Labs CEO Do Kwon explained that the decline in asset values is due to the fact that the blockchain removed UST 150 million from the Curve Finance DeFi protocol to prepare for deployment in the 4pool liquidity pool. According to him, the company initially untied 100 million UST to “reduce the imbalance” of the stablecoin.
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