by Lydia Ludmila 
According to a new report, the wallet identified by multiple independent entities and blockchain analytics firms as the main culprit behind Terra’s collapse could belong to Terraform Labs.
Key Takeaways
- A new report has suggested that the wallet thought to be the main culprit behind Terra’s collapse in May could belong to Terraform Labs or the Luna Foundation Guard.
- The report links the wallet with multiple Binance accounts and wallets allegedly belonging to the Luna Foundation Guard and LUNC DAO, a Terra 2.0 validator allegedly created by Do Kwon.
- LUNC DAO has denied the report’s claims, claiming that the wallet labeled as belonging to the DAO is actually KuCoin’s hot wallet.
A new investigative report by blockchain security company Uppsala Security and CoinDesk Korea has suggested that Terraform Labs may have directly triggered Terra’s collapse over the second week of May.
Terraform Labs May Have Caused Terra Collapse
Terra’s $40 billion collapse may have been an inside job, a new report has claimed.
CoinDesk Korea and blockchain security company Uppsala Security issued a joint investigative report Tuesday alleging that the wallet dubbed by multiple independent entities as the primary culprit behind Terra’s collapse may be owned or controlled by Terraform Labs or the Luna Foundation Guard.
Per the report, the Ethereum wallet commencing 0x8d dubbed “Wallet A”—which has previously been identified as the initial trigger behind UST’s “death spiral” event in two independent post-mortem reports by the crypto market maker Jump Crypto and blockchain analytics firm Nansen—has received all of its funds from a Terra wallet commencing terra1y dubbed “Wallet A(T).” The report then alleges that Uppsala Security used detailed on-chain analytics to connect Wallet A(T) with multiple Binance accounts and wallets belonging to the Luna Foundation Guard and LUNC DAO, a Terra 2.0 validator allegedly created by Terraform Labs CEO Do Kwon following Terra’s collapse. Summarizing its findings, CoinDesk Korea wrote:
“Combining the above findings discovered through on-chain forensics, the Binance user memo ‘104721486’ wallet, LFG wallet, LUNC DAO wallet, Wallet A(T), and Wallet A that received UST from Wallet A(T) are all that leads to the conclusion that the wallets either owned by the same owner or managed by a single group.”
“This means that Terraform Labs or LFG made a financial transaction that caused Terra to collapse on its own,” the local media outlet concluded.
Based on independent on-chain analysis by Jump Crypto, Nansen, and Uppsala Security, Wallet A triggered UST’s death spiral on May 7 by swapping $85 million worth of UST for USDC on the decentralized exchange Curve only 13 minutes after Terraform Labs had withdrawn $150 million of UST liquidity from the UST/3CRV Curve pool. The lack of UST liquidity in the Curve pool and the unprecedented transaction size caused UST to depeg from its $1 target, panicking the market and triggering a cascade of large UST swaps and liquidity withdrawals that further exacerbated the situation. According to Jump Crypto, Wallet A’s $85 million UST swap is the largest transaction in that particular Curve pool to date.
According to CoinDesk Korea’s report, the Seoul Southern District Prosecutors’ Office leading the South Korean investigation into Terra’s implosion is aware of and already looking into “the suspicious flow of funds” from wallets related to Wallet A. “We are tracking the flow of problematic wallets and coins through an on-chain forensic technique,” an official from the prosecutor’s office reportedly told the newspaper.
LUNC DAO Denies Allegations
CoinDesk Korea‘s allegations, however, stand on relatively shaky ground as the LUNC DAO and a pseudonymous crypto sleuth who identifies as FatManTerra on Twitter have challenged the claims laid out in the blockchain analytics firms’ report.
“I found a major hole in their report (based on research from Uppsala Security, a chain analysis firm) making the whole thing untrue,” FatManTerra wrote on Twitter today, arguing that the report was “nonsense” because the wallet commencing terra13, labeled as belonging to LUNC DAO, actually belongs to the crypto exchange KuCoin. “That’s not LUNC DAO’s wallet! That’s KuCoin’s hot wallet! It makes the whole report nonsense, because obviously two addresses are not linked simply by virtue of receiving money from KuCoin,” he wrote.
FatManTerra and LUNC DAO had not provided proof that the terra13 belongs to the KuCoin exchange and we were unable to independently verify the wallet’s true owner by press time.
