- Kwon could repurchase stablecoins by lending them back to himself.
- Do Kwon didn’t care that Anchor’s long-term survival was in jeopardy.
According to the definition of Terra’s UST, it should have always been redeemable for one dollar. UST used an algorithm to maintain its peg instead of using a central issuer like other stablecoins. Starting in February, the Luna Foundation Guard purchased many Bitcoin and other cryptocurrencies as a reserve currency for the UST.
That means LFG would use its Bitcoin holdings to purchase back enough UST to restore its price to $1 if a push occurred on the stablecoin. The UST lost its dollar peg and crashed because of the steep decline in Bitcoin’s value after the Federal Reserve raised interest rates by a half-point on May 7.
Degenbox Critical to Kwon’s Strategy
Terra’s near-unprecedented collapse was just a month ago, yet discussions about the calamity continue. CEO Do Kwon has been accused of cashing out $2.7 billion from the Terra Network before the cryptocurrency’s demise.
FatMan Terra claimed that Kwon, already under investigation by the Securities and Exchange Commission and the Seoul Metropolitan Police Department, committed fraud. Using the Degenbox lending mechanism, Kwon could repurchase stablecoins by lending them back to himself.
🧵 Some of you thought $80m per month was bad. That's nothing. Here's how Do Kwon cashed out $2.7 billion (33 x $80m!) over the span of mere months thanks to Degenbox: the perfect mechanism to drain liquidity out of the LUNA & UST system and into hard money like USDT. (1/13)
— FatMan (@FatManTerra) June 11, 2022
He says that he has a great instrument to shift money out of the LUNA system into genuine currencies like the USDT. As a billionaire with limited liquid assets, he couldn’t just transfer $2 billion from LUNA to USD without causing a major market catastrophe; he said that Degenbox was critical to Kwon’s strategy.
The yield reserve was swiftly drained as more Terra influencers, and thousands of retail consumers adopted this strategy. He said that Do Kwon didn’t care that Anchor’s long-term survival was in jeopardy, even though it was obvious. He said $558 million went to KuCoin, $1.08 billion went to Binance, and $545 million went to Huobi Global.
1/ This should be obvious, but the claim that I cashed out $2.7B from anything is categorically false
— Do Kwon 🌕 (@stablekwon) June 12, 2022
However, the entrepreneur advised the crypto community to steer away from fueling the rumor until it was proven true.
Recommended for you
