Latest updates on the Terra collapse event: Do Kwon proposes to issue new LUNA tokens

Organizer: Chain Catcher

May 18

At around 20:00, a unified proposal regarding the vision for the new Terra 2.0 chain was released by the Terra Builder Alliance, initiating governance vote number 1623. The proposal aims to rename the existing network to Terra Classic, rename the token to LUNA Classic (LUNC), and rebuild a new Terra blockchain and LUNA token without algorithmic stablecoins. Luna will be airdropped to stakers of Luna Classic, holders of Luna Classic, remaining UST holders, and core application developers of Terra Classic. The TFL wallet (terra1dp0taj85ruc299rkdvzp4z5pfg6z6swaed74e6) will be excluded from the airdrop whitelist.

At around 17:00, according to local media munhwa, the Korean law firm LKB will represent ordinary investors in a lawsuit against the Seoul Metropolitan Police Agency, deciding to sue Terraform Labs founder and CEO Do Kwon. Meanwhile, LKB also decided to submit a temporary seizure order for Do Kwon's assets to the Seoul Southern District Prosecutor's Office, and is considering suing another Terra co-founder, Daniel Shin.

At around 13:00, South Korean media reported that investors in Luna and UST plan to apply to the court this week for the seizure of Terraform Labs CEO Do Kwon's assets. The law firm RKB Partners plans to apply for a temporary seizure of Do Kwon's assets and file a lawsuit against him on fraud charges. It is reported that six lawyers from the firm's capital markets legal team and intellectual property team are drafting and reviewing the application for temporary asset seizure and the complaint against the CEO. Meanwhile, investors have decided to sue Do Kwon at the Seoul Police Agency for civil and criminal liabilities arising from the sharp decline in the cryptocurrency market, citing suspicions of fraud.

At around 11:00, according to the Korea Economic Daily, the Korean Financial Services Commission's Capital Markets Research Institute has drafted a report titled "Comparative Analysis of the Virtual Asset Industry Bill Proposed by the National Assembly and Exploration and Review of Related Issues." This report proposes the establishment of a public exchange to conduct new listing reviews and market monitoring for cryptocurrencies, and to access virtual assets based on the current capital market legal system. It has been submitted to the National Assembly's Political Affairs Committee. The report calls for centralized management of virtual asset-related information from public institutions, mandatory disclosure of information including issuers of virtual assets, key participants, plans for the use of raised funds, future value, and management reviews. For Korean virtual assets, a Korean-language white paper must also be provided. The report proposes the establishment of a digital asset management agency as the operator of the virtual asset disclosure system. If this plan is realized, all exchanges, securities firms, custodial settlements, and custodial transfers of virtual asset transactions are expected to undergo significant restructuring.

At around 8:00, according to a report by the Financial Associated Press citing the Korea Economic Daily, South Korea may propose a bill to punish those who obtain unfair profits from cryptocurrency trading through price manipulation, insider trading, or fake orders. After the South Korean parliament requested a study on cryptocurrency regulation, the Financial Services Commission (FSC) prepared this research report. The regulations proposed by the FSC will be stricter than capital market regulations. According to the proposal, those who improperly obtain benefits will face civil and administrative penalties such as fines and compensation liabilities, as well as criminal penalties such as imprisonment. It is reported that the South Korean parliament and government will discuss the details during the legislative process.

May 17

At around 21:00, according to Block, shortly after the collapse of UST and LUNA, the internal legal team of Terraform Labs resigned. Terraform Labs' General Counsel Marc Goldich, Chief Corporate Counsel Lawrence Florio, and Chief Litigation and Regulatory Counsel Noah Axler all stopped working for the company in May, as indicated on their LinkedIn profiles, with each having served at the company for less than a year. An insider stated that Terraform Labs' legal affairs are now handled by external lawyers.

At around 17:00, according to Block Media, sources revealed that at the end of last year, Terraform Labs paid 100 billion won (approximately 78.68 million USD) in taxes to the Korean tax authorities, and it is currently unclear whether Do Kwon is required to pay taxes. Although the country's tax authorities have taxed Terraform Labs, they stated that they cannot intervene in the Terra case due to a lack of relevant regulations. The headquarters of Terraform Labs Korea was liquidated on May 4, and the Seoul branch was liquidated on the 6th. It is currently unclear whether the liquidation of domestic companies is related to this tax. Meanwhile, nearly 300,000 investors in Korea have been affected by the Terra incident, but the country's financial sector cannot directly intervene in this matter.

At around 10:00, the Korean Financial Services Commission and the Financial Supervisory Service have requested that Korean cryptocurrency trading platforms grasp the current situation regarding trading volume and closing prices related to LUNA, the number of investors holding LUNA, the number of individuals with different amounts, and the number of high-value investors exceeding 1 million won. In addition, the Commission and the Supervisory Service also requested trading platforms to provide data on the responses and actions of domestic cryptocurrency trading platforms to the LUNA crisis, as well as the reasons for the price decline as assessed by the trading platforms.

At 1:50, Do Kwon proposed a new "Terra Ecosystem Revival Plan." Specifically, it includes: 1. Forking the Terra chain into a new chain without algorithmic stablecoins, with the old chain referred to as Terra Classic (token Luna Classic--LUNC) and the new chain referred to as Terra (token Luna--LUNA); 2. Luna will be airdropped among stakers of Luna Classic, holders of Luna Classic, remaining UST holders, and important application developers of Terra Classic; 3. The TFL wallet address will be removed from the airdrop whitelist, making Terra a fully community-owned chain; 4. Incentivizing network security through token inflation, with a target staking return rate of 7% per year. Voting will begin on May 18.

May 16

At 17:05, Luna Foundation Guard (LFG) announced the use of reserve funds on Twitter. As of May 7, 2022, LFG held a total of 80,394 bitcoins, 39,914 BNB, 697,344 UST, 1,691,261 LUNA, and assets such as USDT, USDC, and AVAX. Currently, LFG's remaining reserve funds include 313 bitcoins, 1.847 billion UST, over 200 million LUNA, 39,914 BNB, and 1,973,554 AVAX assets (valued at a total of 86.49 million USD) that have not been utilized. LFG is currently seeking methods to use the remaining assets to compensate UST users, prioritizing compensation for small holders, but the specific methods are still under discussion.

At 13:46, LFG advisor Remi Tetot stated on Twitter that the LFG reserve balance is about to be activated, and they are currently waiting for trading platforms to confirm the timing and send it. The priority is to compensate small wallets, builders, and stakers.

At 3:40, Ethereum founder Vitalik Buterin expressed support for the proposal that the Terra fund should prioritize compensating small UST holders, stating that prioritizing compensation for small holders could allow 99.6% of wallets to be fully compensated, which would be more beneficial for stabilizing community sentiment.

At 1:14, Ryan Wyatt, CEO of Polygon Studios, tweeted that they are working with many Terra projects to help them quickly migrate to Polygon. Polygon welcomes the developers and communities of these projects and will invest funds and resources to assist in their migration.

May 15

Data from cryptocurrency analytics firm Elliptic indicates that the LFG Foundation has transferred tokens to two locations. The first batch of 52,000 bitcoins was transferred to Gemini, while another 28,000 bitcoins were transferred to Binance. Another cryptocurrency analytics site, CryptoQuant, reported that 37,000 bitcoins were sent to Gemini on May 9. These 37,000 bitcoins were lent by the foundation to market makers in an effort to save the ecosystem from collapse. As of the time of publication, the LUNA Foundation has not released any information regarding the whereabouts of its bitcoin assets.

At 16:00, Binance founder Changpeng Zhao tweeted that Binance Labs only invested 3 million USD in Terra in 2018 and did not participate in subsequent financing. UST emerged after Binance Labs' investment, so Binance does not hold UST either.

May 14

At 6:15, Terra founder Do Kwon tweeted in the early morning that he is heartbroken over the pain caused by Terra to everyone, stating that neither he nor any institution he belongs to has profited from the incident in any way, and he did not sell luna and ust during the crisis. "I still believe that decentralized economies should have decentralized currencies—but it is clear that the current form of UST will not be that currency," said Do Kwon.

At 4:53, Kava founder Scott Stuart tweeted that the Kava community has decided to remove all Terra risk assets from the protocol. All UST has been removed from Kava Mint, and all remaining collateral auctions for UST have been orderly concluded. UST is now disabled in Mint, and proposal 83 will complete the process of fully removing UST as collateral. USDX will no longer be supported by UST but will be supported by over-collateralized assets such as BTC, BNB, and BUSD.

At midnight, Terra founder Do Kwon released a plan to rebuild the Terra ecosystem on the Terra forum, proposing to issue 1 billion new LUNA coins. Of these 1 billion, 400 million will be allocated to LUNA holders at the moment before UST depegging, 400 million to UST holders, 100 million to LUNA holders at the moment the original Terra chain stopped, and 100 million reserved for future ecological development. Except for the third part of 100 million, the other three parts will be staked at the time of network restart. The future annual inflation rate of the new LUNA can be set at 7%. This proposal is currently under community discussion.

May 13

At 21:56, Binance announced that it would resume trading of LUNA and UST at 22:00, but later stated that the resumption would be delayed.

At 20:46, Terra stated on its official Twitter that the blockchain has resumed block production, and validators have decided to disable on-chain transactions, with the IBC channel now closed.

At 20:00, Coinbase announced the suspension of trading for UST and WLUNA.

At 18:29, Binance founder Changpeng Zhao tweeted that he was very disappointed with how the Terra team handled the UST/LUNA incident and urged their team to restore the network, destroy the additional minted LUNA, and restore the UST peg. However, so far, Binance has not received any positive response.

At 18:18, asset management company GAM Holding AG released a statement saying that it has not negotiated with Terraform Labs regarding support for the Luna stablecoin and is investigating the source of this news and how it was published.

At 17:22, South Korean cryptocurrency exchange Upbit announced that it would delist LUNA from the BTC market at 12:00 local time on May 20. Previously, Upbit reported that the number of LUNA assets was approximately 1.5 billion. Upbit faced controversy for not halting LUNA token trading, with South Korean regulatory officials stating they could not intervene.

At 16:30, Binance suspended trading for the LUNA/BUSD and UST/BUSD spot trading pairs. Withdrawals for LUNA and UST will open once the network stabilizes. (Source link)

At 13:00, according to Reuters, Tether CTO Paolo Ardoino stated that the problem with UST lies in its rapid expansion, which has made it unable to cope with the severe price fluctuations in the market. In addition, the use case for UST is too singular and has not developed any practical payment or trading use cases. This is the reason for its failure.

At 13:14, the blockchain gaming platform C2X announced that it would migrate from Terra to other Layer 1 blockchain networks or establish its own mainnet and sidechain. C2X is a Web3 game architecture development platform built on Terra, which previously completed a 25 million USD financing round led by FTX Ventures, Jump Crypto, and Animoca Brands in March.

At 10:13, Terra stated on its official Twitter that Terra validators have officially halted the blockchain at block 7607789 to propose a reconstruction plan.

At 9:00, the UST price first fell below 0.1 USD.

At 8:36, the Avalanche lending protocol Blizz Finance tweeted that due to Chainlink pausing the LUNA oracle, several attackers were allowed to deposit millions of LUNA and borrow all collateral at a price of 0.1 USD according to the Chainlink oracle. Due to the time lock mechanism, the protocol's assets had already been exhausted before the team paused. According to DeFi Llama data, the protocol's TVL was 8.28 million USD yesterday and is now at 0.

At 6:00, the LUNA price first fell below 0.001 USD.

At 4:06, the decentralized lending protocol Venus Protocol issued a statement saying that after extreme fluctuations in the price of LUNA, Chainlink paused the updates of LUNA's price, causing the price of LUNA in the Venus lending market to remain at 0.107 USD, while the market price of LUNA had dropped to 0.01 USD at that time. After the price updates were paused, two addresses borrowed approximately 13.5 million USD in assets by collateralizing 230 million LUNA (then worth about 2.3 million USD), resulting in a loss of about 11.2 million USD for the protocol. The LUNA lending market has now been suspended, and this loss will be compensated by the risk fund.

At 2:02, Terra officially tweeted that the Terra blockchain has resumed block production, and since the new code merge chain has taken effect, block delegation has been disabled.

At 0:14, Terra stated on its official Twitter that Terra validators have decided to stop the Terra chain at block height 7603700 to prevent governance attacks after severe inflation of LUNA and significantly reduced attack costs.

May 12

At 16:07, Terra released an official statement indicating that they are currently rapidly clearing bad debts from UST circulation to restore healthy on-chain price differences. Current measures include: Proposal 1164 will expand the scale of the base pool and accelerate the burning of UST to help narrow the on-chain price difference. Terraform Labs has also initiated three other emergency actions: 1. Proposing to destroy the remaining UST in the community pool; 2. TFL will burn the remaining 371 million UST cross-chain on Ethereum; 3. TFL has just staked 240 million USD worth of LUNA to defend against network governance attacks.

At 8:00, the UST price adjusted to 0.8 USD.

At 7:00, according to Forbes, asset management companies BlackRock and hedge fund giant Citadel Securities denied having traded TerraUSD and being involved in shorting UST.

At 4:00, the LUNA price first fell below 1 USD.

May 11

At 23:00, according to Coindesk, former Terraform Labs engineer Hyungsuk Kang and a Basis Cash developer told the media that Do Kwon, CEO of Terraform Labs, is one of the anonymous co-founders behind the failed algorithmic stablecoin Basis Cash.

At 22:00, CEOs, co-founders, and investors from companies such as Dragonfly Capital, Multicoin Capital, and Framework Ventures expressed on Twitter that they have no risk exposure to UST and LUNA.

At 16:57, Larry Cermak, Vice President of Research at The Block, replied to a netizen on Twitter that LFG's over 1 billion USD financing plan has failed.

At 14:55, Terra Research announced a proposal to increase the minting capacity of the UST stablecoin to 1.2 billion USD. Terra's governance blog proposed increasing the BasePool from 50 million USD to 100 million Special Drawing Rights and reducing the Pool Recovery Block from 36 blocks to 18 blocks. This would increase the minting capacity of UST from 293 million USD to 1.2 billion USD.

At 14:00, the UST price first fell below 0.5 USD.

At 13:00, the LUNA price first fell below 10 USD.

May 10

At 22:00, according to The Block citing three sources, the non-profit organization Luna Foundation Guard (LFG) is seeking to raise over 1 billion USD from institutions to support UST. The financing sought by LFG is approximately 1 billion to 1.5 billion USD, and institutions will be able to purchase LUNA spot at a 50% discount, locking it for one year, with linear unlocking monthly after one year. Jump Trading, Celsius, and Jane Street have already committed to this financing, with a total commitment of approximately 700 million USD, while Alameda Research has not yet agreed.

At 14:00, the UST price rebounded from a low of around 0.6 USD to 0.9 USD, narrowing the depegging range to 10%.

At 8:00, UST briefly touched 0.7 USDT, having deviated from its peg.

At 4:20, 28,205.54 BTC were transferred to an address marked as Luna Foundation Guard.

At 2:00, the LUNA price first fell below 50 USD.

At 2:21, 42,530.82 BTC were transferred out from the address marked as Luna Foundation Guard, valued at approximately 1.448 billion USD.

May 8

At 22:55, in response to Polygon's Chief Information Security Officer Mudit Gupta's statement that the UST sell-off yesterday was suspicious, Terra founder Do Kwon replied that "removing 150 million UST from Curve is to prepare for deployment to 4pool next week, and the seller of 84 million UST is not us. After UST depegged, we removed 100 million UST to alleviate the depegging. Terraform Labs has no motive to unpeg UST."

At 17:44, Terraform Labs removed 150 million UST liquidity from Curve.

At 06:00, the UST price fell to around 0.982 USD.

May 7

At 17:57, an unknown address sold 85 million UST on Curve, which is considered the beginning of the UST depegging event.