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Whereabouts of Terra’s Bitcoin Reserve a Mystery After Transfers

By Dave Liedtka

The $3.5 billion in Bitcoin purchased as a reserve by the foundation set up by the creators of the failed Terra blockchain became untraceable after it was moved to two cryptocurrency platforms, according to blockchain forensics firm Elliptic. 

What happened to the cryptocurrency held in reserve may become a key question if investors seek to recoup losses suffered in the wake of the collapse of the blockchain. 

Between January and March, the Luna Foundation Guard, or LFG, bought $3.5 billion of Bitcoin, Elliptic said, according to its blockchain analytics tracking tools. 

A novelty Bitcoin arranged in Sydney, Australia, on Friday, March 4, 2022. Bitcoin and other cryptocurrencies rose earlier in the week on the expectation that they might gain traction during Russia’s invasion of Ukraine. The advance was then stymied by concern about the effect of international sanctions against Russia. (Bloomberg)

When the value of Terraform Lab’s TerraUSD, or UST, stablecoin began to fall on May 9, the foundation said it would use Bitcoin from the reserve to purchase UST in order to maintain its one-to-one peg with the dollar. Over the next day, the crypto wallets used to hold the reserves were emptied, Elliptic said.           

About $1.7 billion was sent on May 9 from LFG wallets to a new address through two transactions after Terra co-founder Do Kwon said the funds would be used to support the peg. Within hours, the entire amount was moved to a single account on the Gemini crypto exchange through several transactions and it was not possible to trace the assets from that point, Elliptic wrote. 

The remain Bitcoin reserves were moved on May 10 in a single transaction to an account on the Binance exchange, Elliptic said. The blockchain analytics firm isn’t able to identify whether the assets were sold or moved to other wallets at that point. 

©2022 Bloomberg L.P.

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Dive Deeper:
Terra Hasn’t Killed Crypto, But It Was a Narrow Escape
Algorithmic stablecoins were about to hit prime time. Now they're having an existential crisis.
Terra hasn’t killed crypto, but it was a narrow escape
NEW YORK: Speculation that the collapse of one of the biggest experiments in decentralized finance could bring about the death…
Crypto Exchanges Are Delisting Terra Tokens After Meltdown
Some of the largest cryptocurrency exchanges are suspending or starting to delist the tokens associated with the collapsing Terra blockchain,…
Do Kwon Proposes Terra Hard Fork, Airdrop To TerraUSD, LUNA Holders
Terra (CRYPTO: LUNA) founder Do Kwon has proposed a blockchain hard fork to revive the project’s ecosystem.
One subscription that gives you access to news from hundreds of sites
Non-profit behind Terra ecosystem announces compensation plan to users
In one of the most calamitous events in crypto memory, the $40 billion Terra ecosystem collapsed last week
TerraUSD ‘stablecoin’ delisted from crypto exchanges
‘Algorithmic stablecoin’, whose collapse triggered multibillion-dollar selloff, turns off blockchain
Get all your news in one place