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LUNA Terraform Labs

Terraform Labs Caused Collapse Of Its Stablecoin UST? This Report Says So

Reynaldo Marquez
by Reynaldo Marquez
3 years ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

The company behind the failed Terra (LUNA) ecosystem, now dubbed Terra Classic (LUNC), Terraform Labs (TFL) could be behind the collapse of its native algorithmic stablecoin UST. Per a report from CoinDesk Korea, investigators linked the company to the attack that led to UST losing its peg to the U.S. dollar.

Related Reading | Bitcoin Will Hit $100K In 12 Months, Ex-White House Chief Predicts, Despite Crypto Carnage

Investigators from the news outlet and blockchain security firm Uppsala claimed to have used “forensic techniques for about a month after the collapse of Terra” to track down the attacker. In that sense, they concluded that the address behind UST’s collapse, called Wallet A, is managed by Terraform Labs.

Wallet A was created on May 7th on the Ethereum network. These dates coincide with the first attempt to break UST. As seen below, the investigators linked Wallet A on Ethereum and Wallet A (T) on the Terra network to a series of flows that enable the attackers to bring down UST and LUNA.

Terraform Labs Terra LUNC LUNA
Source: CoinDesk Korea

The flows are tracked to several addresses on Binance and Coinbase, and to other funds transferred to DeFi protocol Curve. The investigator claimed that Wallet A was behind a $150 million withdrawal from a liquidity pool on Curve created to maintain “the liquidity of the Terra blockchain”. The report claims:

Before and after this transaction, a large amount of UST was deposited into various exchanges around the world, accelerating depegging, and eventually a bank run occurred. For this reason, several blockchain analysis companies around the world are pointing out Wallet A as the attacker’s wallet.

As the attack occurred, the report claims that Wallet A received a “large amount of UST” from Wallet A (T) from the Terra blockchain. The interactions between these wallets are linked by their memos, and information required by exchange platforms to identify a specific user to allocate the transferred funds.

An Incomplete Report On Terraform Labs?

Furthermore, the investigators claimed that an entity within the Terra (Classic) ecosystem publicly identified itself as the owner of one of the wallets that allegedly participated in the attack, the LUNC DAO. They concluded:

Combining the above findings discovered through on-chain forensics, the Binance user memo ‘104721486’ wallet, LFG wallet, LUNC DAO wallet, wallet A(T), and wallet A that received UST from wallet A(T) are all It leads to the conclusion that the wallets are either owned by the same owner or managed by a single group. This means that Terraform Labs or LFG made a financial transaction that caused Terra to collapse on its own.

However, pseudonym investigator “FatManTerra” claims the report it’s “total nonsense” and “untrue”. According to this user:

That’s not LUNC DAO’s wallet! That’s KuCoin’s hot wallet! It makes the whole report nonsense, because obviously two addresses are not linked simply by virtue of receiving money from KuCoin. All it means is they are both KuCoin users. Nothing sinister and nothing proven.

Nevertheless, the CoinDesk report could have real-world implications for Terraform Labs, its co-founders, and members of its staff. According to the report, the Seoul Southern District Prosecutors’ Office is “aware of the suspicious” funds flows linked to Wallet A and TFL.

A spokesperson from the Prosecutor’s Office told CoinDesk the following:

We are tracking the flow of problematic wallets and coins through an on-chain forensic technique. In addition to allegations of fraud, charges of breach of trust may be applied depending on the results of the investigation by (Do) Kwon.

Related Reading | Terra’s Do Kwon May Face Charges In The U.S. As Money Laundering Accusations Emerge

At the time of writing, LUNA is $2.5 with a 2% profit on the 4-hour chart.

LUNC LUNA Terraform Labs
LUNC trends to the downside on the 4-hour chart. Source: LUNCUSDT Tradingview
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Reynaldo Marquez

Reynaldo Marquez

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As an editor at NewsBTC, Reynaldo is an experienced journalist passionate about all things crypto. Reynaldo has interviewed key industry leaders, and created unique pieces analyzing the promise of crypto as the next frontier for an economic and social transformation of humanity. Since 2018, he has been at the forefront of the industry, closely following every major development and analyzing critical events at the heart of the crypto industry. With a keen eye for detail and an unwavering commitment to excellence, Reynaldo has been instrumental in bringing the latest news and insights to the crypto community. Outside of work, Reynaldo enjoys lifting weights and literature, which he believes gives him a unique perspective into the world of crypto. As an aspiring trader, he is always looking for new opportunities to explore and believes that crypto holds the key to unlocking the future of finance.

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