The Terraform Labs-Owned Wallet Behind the UST Collapse, According to a New Report

key takeaways

  • A new report has suggested that the wallet believed to be the main culprit in the May Terra crash could belong to Terraform Labs or the Luna Foundation Guard.
  • The report links the wallet to various Binance accounts and wallets allegedly belonging to Luna Foundation Guard and LUNC DAO, a Terra 2.0 validator allegedly created by Do Kwon.
  • LUNC DAO has denied the claims in the report, stating that the wallet labeled as belonging to DAO is actually the KuCoin hot wallet.

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A new research report from blockchain security firm Uppsala Security and Coin Desk Korea has suggested that Terraform Labs may have directly caused the collapse of Terra during the second week of May.

Terraform Labs may have caused the collapse of Terra

Terra’s $40 billion collapse may have been an inside job, according to a new report.

Coin Desk Korea and blockchain security company Uppsala Security issued a joint agreement investigation report on Tuesday alleging that the wallet dubbed by multiple independent entities as the main culprit in the Terra collapse may be owned or controlled by Terraform Labs or Luna Foundation Guard.

According to the report, the Ethereum wallet starts 0x8d dubbed “Wallet A,” which was previously identified as the initial trigger behind the UST “death spiral” event in two independent post-mortem reports from the crypto market creator jump crypto and blockchain analytics company Nansen—you have received all your funds from a Terra wallet starting terra1y called “Wallet A(T)”. The report then alleges that Uppsala Security used detailed on-chain analytics to connect Wallet A(T) with multiple Binance accounts and wallets belonging to Luna Foundation Guard and LUNC DAO, a Terra 2.0 validator allegedly created by the CEO of Terraform Labs, Do Kwon, following Terra’s example. to collapse. Summarizing his findings, Coin Desk Korea wrote:

“Combining the above findings uncovered through on-chain forensics, Binance user memo ‘104721486’ wallet, LFG wallet, LUNC DAO wallet, A(T) wallet, and A wallet received UST from the wallet A(T) are everything that leads to the conclusion that the wallets belong to the same owner or are managed by a single group.”

“This means that Terraform Labs or LFG entered into a financial transaction that single-handedly caused the collapse of Terra,” the local media outlet concluded.

Based on independent on-chain analysis by Jump Crypto, Nansen and Uppsala SecurityWallet A triggered the UST death spiral on May 7 by exchange $85 million worth of UST per USDC on the Curve decentralized exchange just 13 minutes after Terraform Labs had retired $150 million of liquidity in UST from the group of UST/3CRV curves. UST’s lack of liquidity in the Curve pool and unprecedented transaction size caused UST to disengage from its $1 target, causing market panic and leading to a cascade of large UST swaps and liquidity withdrawals. which further exacerbated the situation. According to Jump Crypto, Wallet A’s $85 million UST swap is the largest transaction in that particular Curve pool to date.

According to Coin Desk KoreaAccording to the report, the Seoul Southern District Prosecutor’s Office which is leading South Korea’s investigation into the Terra implosion is aware of and already investigating “the suspicious flow of funds” from wallets related to Wallet A. “We are tracing the flow of problematic wallets and coins through a chain forensic technique,” ​​an official from the prosecutor’s office reportedly told the newspaper.

LUNC DAO denies the accusations

Coin Desk KoreaThe accusations of, however, stand on relatively shaky ground as LUNC DAO and a pseudonymous crypto sleuth who identifies himself as FatManTerra on Twitter have challenged the claims set out in the blockchain analytics firms report.

“I found a big hole in your report (based on research by Uppsala Security, a chain analytics company) that makes the whole thing fake,” FatManTerra wrote on Twitter today, arguing that the report was “nonsense” because the wallet that starts terra13, labeled as belonging to LUNC DAO, actually belongs to the KuCoin cryptocurrency exchange. “That’s not LUNC DAO’s wallet! That’s KuCoin hot wallet! It makes the whole report meaningless, because obviously two addresses are not linked simply by virtue of receiving money from KuCoin,” he said. wrote.

LUNC DAO also refuted the report’s claims, claiming that the alleged wallet does not belong to the organization. “These astute investigative journalists say that LUNC DAO owns the KuCoin exchange wallet (used by millions of people) and therefore Do Kwon created LUNC DAO,” he says. wrote on Twitter, citing the report.

FatManTerra and LUNC DAO had not provided proof that terra13 belongs to the KuCoin exchange and crypto report was unable to independently verify the true owner of the wallet at press time.

Disclosure: At the time of writing, the author of this article owned ETH and several other cryptocurrencies.

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