The announcement comes after reports that over a billion dollars of Terra’s bitcoin reserves are unaccounted for.
The Luna Foundation Guard (LFG), official stewards of Terra’s bitcoin reserves, released a statement on Monday documenting how it disbursed millions of dollars worth of crypto in its failed attempt to maintain the peg of stablecoin terraUSD (UST).
In the statement, LFG notes that its BTC reserves have depleted almost entirely — from around 80,000 BTC to about 300. The remaining assets, which mostly comprise of the crashed UST and LUNA tokens, will apparently be used to compensate investors.
In one of the calamitous events in crypto memory, the $40 billion Terra ecosystem collapsed last week when the UST stablecoin — which is supposed to be worth $1 — dropped below 20 cents. The LUNA token, which is designed to serve as a sort of shock absorber for UST’s “algorithmic” dollar-pegging mechanism, crashed from $80 to below $0.002.
In a tweet on Monday, LFG said it sold off most of the BTC in its reserves for UST as Terra’s ecosystem was beginning to collapse early last week.
LFG said it transferred over 50,000 BTC “to trade with a counterparty” on May 8, as the UST price was originally starting to slump.
It said the funds were used for “directly executing on-chain swaps and transferring $BTC to a counterparty to enable them to enter trades with the Foundation in large size & on short notice.”
On May 12, LFG says another 30,000 BTC from its reserves were sold off by Terraform Labs (TFL), the original company behind Terra, “in a last ditch effort to defend the peg.”
LFG confirmed the remainder of its reserves, which once totalled over $3 billion, have sunk almost completely as a result of the unsuccessful effort to defend UST.
LFG says these funds will be used “to compensate remaining users of UST, smallest holders first.”
Monday’s statement from LFG comes amid criticism that Terra’s reserve funds — which were supposed to belong to the “decentralized” Terra community — were handled with a lack of transparency by Terra’s centralized leaders and investors.
It also comes after leading figures in the blockchain space, including Ethereum Founder Vitalik Buterin, have called for Terra to compensate smaller holders of UST and LUNA before its largest investors.
UST’s price plummeted further in response to Monday’s announcement — from $0.15 to $0.07.