The fall of the Terra ecosystem is one of the many tragedies that will hardly leave the mouths of crypto investors and enthusiasts for a long time to come. It has been months since the crash of the promising blockchain ecosystem, and its algorithmic stablecoin $UST ensured the loss of many brokers, traders, and exchanges exposed to it.
Since the recent crash of the popular crypto exchange platform FTX, crypto Twitter has taken the incentive to compare the FTX crash against the Terra ecosystem, saying there are similar traits between these two bankrupt companies.
In a recent audit report that was carried out by a New York-based consultancy firm, JS Held, there has been an issuance of a notice which proves that Luna Foundation Guard (LFG) spent $2.8 billion in trying to save Terra’s stablecoin $UST from being pegged from May 8th to May 12th, as opposed to the general belief that has been circulating the internet.
The report also states that the parent company of Terra ecosystem, Terraform Labs (TFL), had also spent $613 million of its proprietary capital in defending Terra’s $UST peg. Both companies had spent $3.4 billion to defend Terra’s peg, doomed to fail.
The JS Held firm carried out the audit with its primary goal of bringing clarity to peg defense activity and removing reports of theft, fund misappropriation, and embezzlement, which Luna Foundation Guard had been accused of.
The actions of LFG and TFL in trying to sustain the Terra ecosystem eventually failed, regardless of the large sum that was pooled for its peg defense. The value of $UST dropped to zero when the $60 billion crypto ecosystem finally ended. This worldwide fallout of Terra caused a chain reaction that negatively affected many companies exposed to the failed ecosystem. There were reports of lenders, brokers, and exchange platforms that filed for bankruptcy protection after the crash of Terra.
LFG’s dashboard now displays its leftover amount after the courteous service of trying to aid Terra from going under. What is left of the Foundation in its reserve is $83.93 million, along with $5.24 worth of its Bitcoin reserve.
Reasons For Luna Foundation Guard’s Auditing
The Foundation declared that its reason for carrying out an audit is to promote transparency within the Web3 universe and debunk rumors that cited embezzlement of funds and the funds being used to settle insiders in the company. According to LFG, every peg defense executed is on the peg markets with no equitable treatment to any party.
Responding to speculations that the funds may have been frozen, Luna Foundation Guard adds that they were resting in a self-hosted wallet that has not been touched since May 16th.
Kwon’s Response To Terra’s Collapse Comparison With FTX
Do Kwon, the founder, and owner of the crashed Terraform Labs, clarified that the collapse of the ecosystem could not be likened to the recent failures in crypto.
Do Kwon is still on the run from the South Korean authorities. He is on Interpol’s Red Notice, the Terraform Labs (TFL) founder, and has been facing harsh scrutiny from regulators worldwide. However, he has managed to set things straight by explaining that the real reason for the crash of the promising ecosystem was due to a “weakness” in the protocol’s building that eventually led to its fallout against the harsh market conditions.
The audit carried out by JS Held has proved that Luna Foundation Guard and Terraform Labs did their best in maintaining the value of Terra $UST. However, there was no hope for the stablecoin to last any longer than it did. The report revealed that LFG spent 80,081 BTC and 49.8 million stablecoins in its bid to defend the $UST peg. Both companies lost a lot of funds in the crash of the Terra ecosystem, along with every other crypto company that was exposed to the ecosystem.
The Luna Foundation Guard (LFG) audit done by JS Held records that the former, along with Terraform Labs, had spent a hefty sum trying to retain the value of Terra’s stablecoin $UST in a peg defense. Unfortunately, all efforts were later wasted as the founder of Terraform Labs is a wanted man worldwide. He did, however, mention that there are no similarities between the crash of FTX and the collapse of the Terra ecosystem.