What Happened To $1.2 Billion Worth Bitcoin In LFG’s Reserves?
Over $1.2 billion worth Bitcoin of Luna Foundation Guard’s UST FX reserves remains unaccounted for.
Luna Foundation Guard (LFG), a non-profit organization formed to support the growth of the Terra ecosystem, has not provided an answer to a crucial question about its bitcoin reserves after Terra’s collapse.
LFG accumulated a total of 70,736 bitcoins (worth over $2 billion) as forex reserve for Terra’s algorithmic stablecoin UST. Over couple days it severely depegged from USD value and created a huge mess in the crypto market.
LFG acquired those bitcoins to save UST, but it failed. UST was meant to be worth $1 at all times being a stablecoin. It’s current value stands at $0.21.
In other words, LFG’s bitcoin reserves failed to ensure UST’s peg against the dollar. Out of the total bitcoin reserves, LFG recently provided a loan of $750 million in bitcoin to over-the-counter trading firms and market makers. In the tweet, they wrote that it was “to help protect the UST peg.”
Adding it all up, LFG should still have more than $1.2 billion worth of Bitcoin in its reserves. As of now, the organization has not given any details on those funds.
Last clip withdrawn by the LFG was ~37K BTC. Similar to the last deployment, it has been loaned to MMs.
Very little of the recent clip has been spent but is currently being used to buy $UST.
Updates coming.
— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022
Where is the $1.2 billion worth BTC?
LFG’s wallet address has received 70,736 bitcoins in total, worth over $2 billion. It has also sent out that entire amount, showing the balance as zero.
It is not clear where exactly it has sent those funds, as the Bitcoin blockchain doesn’t label private wallets on-chain.
According to a crypto researcher, Mika Honkasalo:
“It is strange that there’s no clear accounting on what happened to those funds. $750 million was given to market makers and the rest has been moved from the treasury address — but there’s no indication what has been done with them. This should be a matter that is easy to clear up.”
LFG tweeted last week that it had accumulated a total of 80,394 bitcoin in its reserves. Wallet addresses of those extra 9,658 bitcoins aren’t publicly known.
2/ The OTC swaps included 1 billion $UST for $1 billion worth of $BTC with Genesis, and the LFG purchased an additional $500 million worth of BTC via 3AC.
The acquired BTC brings the LFG’s total holdings to ~80,394 Bitcoins.
— LFG | Luna Foundation Guard (@LFG_org) May 5, 2022
Also, there are no public details of the $750 million loan; who the borrowers are, the interest rate, and the loan’s current status etc.
According to Honkasalo, the entire bitcoin reserves could have been sold by LFG since that was supposed to be done to shore up UST’s peg. Or, some of it could been reserved for some future use that is undecided or unannounced.
Amid the UST chaos, LFG was said to be seeking even more funds, an additional amount of over $1 billion, to defend the stablecoin’s peg, but those efforts seem to have stalled since LFG hasn’t made any announcements in that regard.
