Category: Terra

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Crypto News Cryptocurrency Law Terra TerraUSD

Terra Drama Continues as Authorities Raid Exchanges Linked to the Collapse

South Korean authorities are raiding crypto exchanges linked to Terraform Labs’ collapse in May, according to report this week by News1 Korea:

‘At Least’ 15 Exchanges Raided

The Joint Financial and Securities Crime Investigation Team of the Seoul Southern District Prosecutors’ Office raided the offices of at least 15 entities, including Bithumb, Upbit, Coinone and Korbit. Prosecutors are seizing all materials that can work as evidence if Terraform Labs CEO Do Kwon or any other executive is found guilty of causing Terra’s meltdown.

A month ago, claims surfaced on Twitter accusing Do Kwon of cashing out over US$80 million a month prior to the LUNA collapse, which caused a domino effect on the stablecoin market.

Shortly after, Korean authorities launched a full-scale investigation targeting Terraform Labs staff. The company’s employees, who have been prohibited from exiting the country, were summonsed by prosecutors to testify as to their involvement with the project.

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Blockchain NFTs Polygon Terra

Terra-Based Projects Begin Mass Exodus to Polygon After Terra Implosion

More than 48 projects originally built on the Terra blockchain have begun to migrate to Polygon in the wake of Terra’s sudden collapse in May:

According to Polygon Studios CEO Ryan Wyatt, some of the projects migrating to Polygon include the non-fungible token (NFT) marketplace OnePlanet, the multiverse platform Lunaverse, and the play-to-earn-game Derby Stars.

OnePlanet’s Ark*One Initiative Spurs Migration

Following Terra’s collapse, OnePlanet launched an initiative known as Ark*One, whose purpose was to save innovative NFT projects built on the failed blockchain. Ark*One has been a driving force behind the migration from Terra to Polygon, with 48 NFT projects comprising 90 NFT collections having applied for financial and technical support through the initiative.

Applications to Ark*One closed on June 15. This date also marked the end of Polygon Studios’ financial support to the initiative. However, Ark*One will continue providing technical support to projects wanting to migrate from Terra to Polygon.

Why Polygon?

One of the main reasons so many Terra projects have chosen to migrate to Polygon is that it offered substantial financial support to entice projects. In the weeks after Terra’s collapse, Polygon Studios launched a multimillion-dollar fund specifically to attract projects from Terra onto the Polygon blockchain.

OnePlanet has also cited several reasons Polygon was an attractive destination, beyond simple financial support, writing in a blog post:

Taking into consideration the key factors such as mass adoption, market opportunities, stability and foundation-level support, we found that Polygon is currently the most prominent chain with so many big projects and entities onboarding … Moreover, Polygon has the low gas fee of $0.0025 on average and high throughput of being able to process up to 7,000 transactions per second, which shows huge potentiality to bring a larger audience to the chain. 

OnePlanet blog
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CeFi Crypto News Terra

Contagion Spreads as Crypto Lender ‘Vauld’ Freezes Withdrawals

Crypto lending platforms are increasingly under the microscope and the latest evidence of “tragic contagion” is Singapore-based crypto lending firm Vauld, who just became the latest to suspend all withdrawals, trading and deposits on its platform.

The blowback has been swift and brutal:

Contagion in Market Motion

In a prepared statement, Vauld’s co-founder and CEO Darshan Bathija outlined the reasons for the decision to suspend services:

This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate which has led to a significant amount of customer withdrawals in excess of $197.7m since 12 June 2022 when the decline of the cryptocurrency market was triggered by the collapse of Terraform Labs’ UST stablecoin, Celsius network pausing withdrawals, and Three Arrows Capital defaulting on their loans.

Darshan Bathija, co-founder and CEO, Vauld

Just weeks ago, the firm announced cuts to its staff complement, suggesting it may have foreseen pain on the horizon:

Tellingly, within a matter of days, a suite of other crypto businesses followed suit including BlockFi, Crypto.com, Coinbase and, most recently, Banxa.

Advisory Firm to Assist with Corporate Restructure

Vauld, which raised US$25 million last year, has now enlisted an advisory firm to assist with its corporate restructure, claiming that management is “fully committed” to achieving the best outcome for all stakeholders.

In the interim, the company has made the “difficult decision” to suspend all services and has committed to providing an update to its customers in due course. Many influencers have been called out for promoting Vauld, while others appeared to take a more sanguine approach:

Given the recent market downturn coupled with the drama at Terra, Celsius, BlockFi and Three Arrows, it’s no surprise to see depositors flee for safety. As the ‘Oracle of Omaha’, Warren Buffett, once opined:

It’s only when the tide goes out that you learn who’s been swimming naked.

Warren Buffett
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Bitcoin Crypto News Terra

$10 Billion Crypto Venture Capital Fund ‘3AC’ Reportedly Liquidated by BVI Court

Troubled crypto hedge fund Three Arrows Capital (3AC) has been ordered into liquidation by a court in the British Virgin Islands, according to a news report published amid the 2022 crypto crisis.

The order came on June 29, the same date that crypto asset broker Voyager Digital issued a notice of default to 3AC for its failure to pay its 15,250 Bitcoin and 350 million USDC loan. Voyager’s shares had plunged after it disclosed its exposure to 3AC.

3AC Liquidation Marks ‘Significant Moment’ in Sector

Singaporean-based crypto hedge fund 3AC, which was set up in 2012 by partners Su Zhu and Kyle Davies, has been plunged into liquidation amid current crypto market turmoil.

The fund suffered heavy losses as Bitcoin dropped below US$20,000 for the first time in two years and the possibility of insolvency was reported in mid-June after the firm incurred at least US$400 million in liquidations.

Crypto insiders have described the liquidation as “a significant moment in the current unravelling of the cryptocurrency sector, which [had] grown at breakneck speed in recent years”.

3AC’s troubles can be attributed to its significant exposure to Terra’s LUNC token. Reportedly, 3AC’s position of roughly US$200 million in locked Luna Classic evaporated to less than a thousand dollars, with Davies telling The Wall Street Journal that “the Terra Luna situation caught us very much off guard”.

Like many in the space, Twitter user LomahCrypto is of the opinion that 3AC could have acted earlier, tweeting: “I try not to shit on 3AC but ffs I don’t understand how you could tweet some shit like this in May, while your firm is severely underwater and probably at risk of liquidation. Either the self-awareness is nonexistent or this was an actual hint into their operations.”

3AC co-founder tweeted this in May. Source: MoonOverLord via Twitter

Nothing to See Here: Founders

As reports run rampant regarding 3AC’s insolvency, the company’s founders continue to assure customers that they are doing their best to find an equitable solution to the current situation. As such, the firm has hired legal and financial advisers to explore assets sales and a possible rescue package by another firm.

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Crypto Exchange FTX Markets Terra Tether

FTX Founder ‘SBF’ Warns Some Crypto Exchanges Are ‘Already Insolvent’

One of the richest men in crypto, 30-year-old FTX founder and CEO Sam Bankman-Fried (also known as SBF), has warned that some “third-tier” crypto exchanges are already secretly insolvent.

Among his recent comments to Forbes, SBF declined to name which exchanges he believes are currently broke. However, his warning comes as the fallout from the May collapse of the Terra blockchain continues to wreak havoc across the crypto market, with the highly Terra LUNA-exposed Singapore-based venture capital firm Three Arrows Capital (3AC) recently announcing it’s nearing insolvency.

SBF Bails Out Struggling Firms

As a result of 3AC’s insolvency issues, fellow crypto-focused firms BlockFi and Voyager Capital – which had each given 3AC sizeable loans – also found themselves in treacherous financial waters. 

Fortunately for these firms, SBF swooped in, through his exchange FTX and trading firm Alameda Capital, to provide US$250 million in credit to prop them up and protect their customers’ funds.

Speaking to Forbes about the credit infusion SBF said, “ … You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilise things and protect customers.” 

Of course, stabilising the crypto market and seeing it grow is also very much in SBF’s interest – his US$20.5 billion fortune is closely tied to the performance of the crypto market.

It has also recently emerged that SBF may be looking to go beyond simply providing credit to BlockFi, with reports suggesting he is now in talks to acquire the New York-based firm.

SBF Expects to See Numerous Exchanges Fail

Despite his willingness to prop up some ailing crypto firms, SBF doesn’t anticipate this generosity being applied indiscriminately across the industry. Talking to Forbes, SBF said there were companies throughout the crypto industry that were beyond saving:

There are companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues, or that there is not much of a business left to be saved. 

Sam Bankman-Fried, founder, FTX 

Tether Won’t Collapse

One much-maligned digital asset SBF has no fears for is crypto’s largest stablecoin, Tether (USDT). While many consider the collapse of the US$70 billion stablecoin is inevitable due to its reportedly less than ideal collateral situation, SBF claims there’s no reason to worry, saying: “I think that the really bearish views on Tether are wrong … I don’t think there is any evidence to support them.”

In other SBF news, the crypto magnate declared on a podcast last month that he was willing to donate up to US$1 billion to the US Democratic Party to keep Donald Trump from returning to the White House.

Categories
Crypto News Korea Terra

South Korean Prosecutor Bans Terra Employees From Leaving the Country

Former employees of Terraform Labs have been reportedly prohibited from exiting South Korea as investigations into the company continue following last month’s Terra USD collapse.

Developers and other former staff have been unable to leave the country as prosecutors have imposed a departure ban on key personnel involved in the project:

Former Employees Knew Nothing of Travel Embargo

On June 20, the newly reconstituted Financial and Securities Crimes Joint Investigation Team announced a travel embargo had been put in place to prevent “persons of interest” in the case from leaving the country. The move could also be seen as preparation for additional investigative activities such as search and seizures, as well as subpoenas to be served on other prospective defendants.

One of Terra’s former developers, Daniel Hong, confirmed via Twitter that Terraform Labs employees had received an exit ban from the South Korean government. According to Hong’s tweet, none of the employees was notified to avoid any possibility of destruction of evidence as the investigation continues.

The move comes only weeks after South Korean authorities targeted Terraform Labs staff for questioning and moved to freeze the foundation’s assets.

Hong shared his dismay at the ban, stating that it shows employees are being treated as criminals, which he described as “unacceptable”.

Categories
Binance Crypto News Terra

Class-Action Lawsuit Launched Against Binance US for UST Collapse

An unprecedented class-action lawsuit numbering more than 2,000 plaintiffs has been filed against Binance.US in the aftermath of the Terra collapse, accusing the exchange of “misleading investors”.

First Terra Class-Action in the US

Filed in the US District Court for the Northern District of California, the lawsuit marks the first Terra class-action in the US. Roche Freedman LLP will be championing the investors’ case in alleging that Terra’s US dollar-based UST was marketed with higher stability than claimed and promoted by misleading advertising.

Roche Freedman also alleges that Binance.US is not registered as an exchange, nor as a broker-dealer, meaning it could have been violating securities law by listing an unregistered security in UST:

Binance.US has responded to these claims in stating that “Binance.US is registered by FinCEN [US Treasury’s financial intelligence unit] and adheres to all applicable regulations. These assertions are without merit, and we will defend ourselves vigorously.” The lawsuit also names Binance’s chief executive, Brian Shroder, as a co-defendant.

Binance Challenges Money-Laundering Allegations

Only a week ago, Binance challenged allegations regarding the laundering of US$2.4 billion. According to a Reuters report, the stolen funds had been laundered through the exchange between 2017 and 2021. The report, which Binance labelled a “woefully misinformed op-ed”, followed previous investigations into unreported crypto income.

Categories
Crypto News Terra

Claims Surface of Do Kwon Draining $80 Million a Month Before Terra Collapse

Terra Labs’ CEO Do Kwon has struggled to stay away from headlines over the past few months and this past weekend was no different, as explosive claims emerged that he had drained US$80 million a month prior to the infamous LUNA collapse.

Kwon Accused of Rugging LUNA Holders

The claim first appeared on Twitter in a lengthy thread by self-appointed Terra sleuth FatManTerra. In a lengthy exposé, he shared how the Terra Labs CEO, together with a slew of influencers, managed to drain US$80 million a month while artificially maintaining the liquidity. In fact, he suggests that Kwon had, until the collapse of Terra, been cashing out US$80 million every month for almost three years.

The report, which surfaced this past weekend, claims that Kwon drained liquidity out of Luna Classic (LUNC) and TerraUSD Classic (USTC) before the crash, and prior to purchasing Tether (USDT).

FatManTerra then proceeded to outline the mechanism as to how this was achieved:

Kwon Plays Innocent

Kwon has denied the accusations, saying:

This should be obvious, but the claim that I cashed out $2.7B from anything is categorically false.

Do Kwon, CEO and founder, Terra Labs, via Twitter

Kwon, who at the time of LUNA’s collapse claimed to be “heartbroken”, suggested that the rumours of him cashing out “clearly” contradicted claims that he still holds most of his LUNA holdings, obtained during the airdrop. He added that:

To reiterate, for the last two years the only thing ive earned is a nominal cash salary from TFL, and deferred taking most of my founder’s tokens because a) didn’t need it and b) didn’t want to cause unnecessary finger pointing of ‘he has too much’.

Do Kwon, CEO and founder, Terra Labs, via Twitter

Not finished there, Kwon told the community that “spreading falsehood” only added to the pain of all LUNA investors:

I didn’t say much because I don’t want to seem like playing victim, but I lost most of what I had in the crash too. I’ve said this multiple times but I really don’t care about money much.

Do Kwon, CEO, Terra Labs

Poor to Blame for Being Poor

It’s difficult to take Kwon’s claims seriously that he “doesn’t care about money much”, especially in light of his penchant for labelling his critics as “poor”:

Image
Selection of Kwon comments re “poor”. Source: @soy_eth
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Whether the allegations are true or not, Kwon evidently has a long way to go in order to regain credibility and trust within the crypto community. With a class-action lawsuit pending and SEC investigation under way, Kwon looks set to remain in the spotlight for now, albeit for all the wrong reasons.

Categories
Blockchain Crypto News Terra

Whistleblower Claims LUNA ‘Isn’t Community-Owned’ After Token Drops 56%

A Terra whistleblower has taken to Twitter to rubbish claims by founder Do Kwon that the newly launched Terra 2.0 network is “community-owned”, accusing Kwon and his company, Terraform Labs (TFL), of holding substantial amounts of LUNA 2.0 in what he (the whistleblower) calls “shadow wallets”: 

These accusations follow a rough week for LUNA 2.0 in which it lost over 50 percent of its value. At the time of writing, CoinGecko shows LUNA 2.0 valued at US$4.59, down from its recent high on May 31 of US$10.24, a drop of 56 percent in seven days.

Accusation of Shadow Wallets

The accusations of TFL holding secret stashes of LUNA come from Twitter user and prominent Terra critic FatMan. On June 6, FatMan posted a Twitter thread laying out his evidence that TFL and Kwon secretly hold large quantities of LUNA. FatMan listed several Terra accounts linked to TFL and Kwon which collectively hold approximately 42 million LUNA, currently valued at around US$200 million:

This is a serious accusation as Kwon has repeatedly insisted the newly launched Terra blockchain is community owned and controlled. According to FatMan, his evidence shows this claim is not true, tweeting:

“Do Kwon has stated numerous times that TFL has zero new LUNA tokens, making Terra 2 ‘community-owned’. This is an outright lie that nobody seems to be talking about. In fact, TFL owns 42M LUNA, worth over $200m, and they’re lying through their teeth.”

Claims Secret Holdings Used to Manipulate Governance

FatMan further claimed that Kwon used his LUNA holdings to influence governance of the new blockchain and approve his own proposal, claiming in another tweet:

“Do [Kwon] used his shadow wallet to approve *his own proposal* through governance manipulation (TFL is not supposed to vote), told everyone it would be a community-owned chain, and then gave himself a nine-figure score. These are just the verified wallets – there are many others.”

Terra 2.0 Dogged by Issues

Most responses to FatMan’s thread expressed concern about the alleged dishonesty and called for Kwon to be held accountable:

However, some users also questioned the significance of these allegations and accused FatMan of conspiratorial thinking:

Terra 2.0 was launched in late May following the collapse of the original Terra ecosystem. Since its launch the new blockchain has struggled, losing almost 80 percent of its value immediately after going live and continuing to be dogged by accusations of shady practices.

Categories
Crypto News DeFi Hackers Mirror Protocol Terra

DeFi Protocol ‘Mirror’ Exploited for $2 Million Due to Buggy Code

Terra-based DeFi app Mirror Protocol has suffered an estimated US$2 million exploit related to the recent rebrand of the original Terra blockchain as Terra Classic. 

This is the second major exploit of Mirror Protocol to be revealed in the past week:

During the attack, the pools for mBTC, mETH, mDOT and mGLXY were virtually completely drained – and initially there were fears all asset pools could be drained, before developers belatedly patched the exploit.

What is Mirror Protocol?

Mirror Protocol is a DeFi app that allows for the creation of digital ‘mirrors’ of real-world assets, such as stocks and other cryptocurrencies, which closely track the price of the assets on which they’re based. 

Mirror is built on the Terra Classic blockchain, but its assets are also available on other chains such as Ethereum and Binance Smart Chain.

Attacker Exploited Confusion Caused by New Terra Chain

The attack was initially discovered by a user of the Mirror Protocol forum known as Mirroruser and was shared on Twitter by Terra analyst FatManTerra.

FatManTerra explained the exploit was possible because many Terra Classic validators were running outdated software and reporting the price of the new Terra (LUNA), which at the time was valued at about US$9.80, rather than the price of the original Terra Classic (LUNC), valued at around US$0.0001. This discrepancy allowed the attacker(s) to acquire US$1.3 million of collateral, such as mBTC, for every US$1000 in LUNC they spent:

There were initially fears that the exploit wouldn’t be fixed before US stock markets opened, allowing the attacker to drain stock-based asset pools such as mAAPL and mAMZN: 

Fix Put in Place Before Trading Begins

However, this was narrowly avoided as the developers were able to fix the incorrect pricing information just before US markets opened. The devs also disabled the usage of mBTC, mETH, mDOT and mGLXY, meaning the attackers couldn’t use their ill-gotten assets to drain any other pools.

This was the second major exploit of Mirror Protocol revealed this week. Just days ago, FatManTerra reported an attack that occurred on October 8, 2021 and went unnoticed for an astonishing seven months, resulting in the loss of more than US$88 million in assets.

The past month has been rough for DeFi, with the chaos surrounding the collapse of the Terra ecosystem causing large discrepancies across platforms in the price of Terra-based stablecoin UST, leading to significant losses for some DeFi apps such as Blizz Finance and Venus Protocol. 

DeFi exploits have also become increasingly commonplace of late; just weeks ago, Fortress Lending was taken for an estimated US$3 million.