Terra decides to release "Terra 2.0", because apparently the way to fix a crypto catastrophe is with more crypto

Following the dramatic collapse of Terra earlier this month, the Terra ecosystem voted to pass a proposal by Do Kwon to create "Terra 2.0". The project intends to "effectively create a new Terra chain without the algorithmic stablecoin" — an odd choice given that the whole point of the original Terra was the stablecoin. The proposal also involves renaming the existing Luna ($LUNA) coin to "Luna Classic" ($LUNC), so that Luna 2.0 can take its place — a change that I'm sure will not cause any confusion whatsoever.

Billy Markus, one of the original creators of the Dogecoin cryptocurrency (both of whom have since left the project), tweeted, "luna 2.0 will show the world just how truly dumb crypto gamblers really are".

Users threaten to sue after yield generation project Stablegains loses $44 million in Terra collapse

A class action law firm sent a letter to the yield generation project Stablegains, demanding records on customer accounts, marketing and advertising strategies, and communications relating to the Terra stablecoin. Stablegains described itself as aiming to "make it simple and safe for everyone to benefit from advances in financial technology", and promised that "regardless if crypto markets are soaring or crashing, the value of assets under our management remains stable".

Unfortunately for their customers, it turned out that Stablegains was heavily invested in the Terra project's Anchor protocol, which collapsed along with the rest of the Terra ecosystem last week. Stablegains' website had stated they primarily generated yields through the asset-backed stablecoin USDC. However, after the collapse of Terra, Stablegains admitted that "All users' holdings are in UST" — which lost over 90% of its value.

Class action lawsuits filed against Terra founders after crypto collapse

Following the collapse of the Terra ecosystem and its tokens TerraUSD and Luna, affected Korean investors have filed both criminal and civil lawsuits against the project's creator, Do Kwon. Represented by RKB & Partners, the lawsuit seeks to seize Kwon's assets and pursue fraud charges.

Another Korean group, calling themselves "Victims of Luna, UST coins", has amassed 1,500 members and reportedly plans to file a lawsuit against Kwon and Terraform Labs' other cofounder, Shin Hyun-Seong (who is also known as Daniel Shin, and is no longer with Terraform Labs).

This development may be particularly inconvenient for Kwon and Shin, given Terra's legal team quit the company the previous day.

On June 17, another investor filed a separate lawsuit against Terraform Labs, Kwon, and various others in a US court.

Terraform Labs' legal team resigns

In what seems like a bad sign for Terraform Labs, the developer of the Terra blockchain and the TerraUSD (UST) and Luna cryptocurrencies, the three members of the company's legal team left the company. This came shortly after UST, Luna, and the entire Terra ecosystem dramatically collapsed after the stablecoin lost its peg last week.

CZ admits Binance held Luna and UST in bizarre tweet threads

On May 15, Binance CEO Changpeng Zhao (widely known as CZ) created a tweet thread in which he attempted to speak nonchalantly about questions that had "just occurred to [him]" about whether Binance held any UST. In the thread he attempted to distance himself from decisions or knowledge around such holdings, speaking cavalierly about how "we probably do have some". Former FBI agent James Harris wrote an interesting analysis of the thread, concluding, "If people weren't worried before, they will be now. If investigators weren't suspicious before, they should be now."

The following day, CZ tweeted, "Binance received 15,000,000 LUNA (at peak worth $1.6 billion USD, now not much) as part of the original ($3m) invest. 560x return at peak." In this tweet, "not much" glossed over the fact that these LUNA, obtained in return for a $3 million investment and at one point nominally worth $1.6 billion, are now worth $2,900.

He also wrote that Binance had 12,000,000 UST — worth $12 million when UST was properly pegged, and now worth $1.16 million (assuming liquidity exists to sell it at all).

Luna Foundation Guard reports what it did with its Bitcoin reserves, raising more questions

Many were eagerly awaiting a report from Luna Foundation Guard (LFG) on what happened to the several billion dollars' worth of Bitcoin reserves they once held, which they transferred during the UST collapse. The organization tweeted an explanation of the actions they took with those funds on May 16, describing how they began to convert Bitcoin to UST. They referred to transferring BTC and other reserves to "a counterparty", who traded them UST in exchange. They didn't name who these counterparties were.

More than a few people were unsatisfied with this reporting, asking more transparency around who these "counterparties" were. Ultimately, this action benefited the "counterparties", providing liquidity to these whales who were able to exit their now risky UST positions for a good price, and did not help most of the individuals holding UST.

People continue to wait for a public accounting of what happened to Terra's $3.5 billion in Bitcoin reserves

Now that the dust is settling somewhat from the dramatic collapse of Terra, people are beginning to wonder when they'll hear more about what exactly happened to the 80,394 Bitcoin (priced at $3.5 billion at time of purchase; priced closer to $2.5 billion at the time of writing this entry) that previously belonged to Luna Foundation Guard (LFG). The project had previously purchased the assets to hold as reserves, and as UST began to lose its peg, LFG announced they would use those reserves to buy UST to help maintain the peg. Over the next few days, the reserves were emptied, but after they were moved to the Gemini exchange they became impossible to trace further. Although transactions are usually quite traceable on the blockchain, when funds are moved to services like the Gemini exchange, they become impossible to trace using public data because of how exchanges pool funds and transactions internally.

Terraform Labs CEO Do Kwon tweeted on May 13 that "We are currently working on documenting the use of the LFG BTC reserves during the depegging event. Please be patient with us as our teams are juggling multiple tasks at the same time." It's not clear when this documentation will be released. Binance CEO Changpeng Zhao joined the group of people asking about the BTC reserves, tweeting, "I would like to see more transparency from them. Much more! Including specific on-chain transactions (txids) of all the funds. Relying on 3rd party analysis is not sufficient or accurate."

Blockchain insurance company InsurAce shortens their claims window for Terra holders to just a week

InsurAce is a defi insurance provider (oh yes, they exist) that allows people to buy insurance against events including smart contract vulnerabilities and stablecoin depegs. Following the Terra collapse, InsurAce suddenly announced that its customers who held Terra had only a week to file claims, and that "Late submission [sic] will be rejected without further appeal".

Altogether, InsurAce says they paid out about $11 million to around 173 claimants as a result of the depeg. Evidently there were 61 others who did not submit their claims within the deadline.

Crypto.com reverses some Luna trades, offers $10 consolation prize

One of the features of crypto that its proponents sometimes highlight is that transactions can't be reversed. This, of course, is not true when making trades on exchanges like Crypto.com, who can largely do whatever they want with the wallets they maintain and the coins they keep track of on users' behalf.

On May 13, the company announced it would be reversing transactions made during an hour-long period on May 12 when "users who traded LUNA were quoted an incorrect price". Some users were able to profit off the discrepancy, but later were told that their transactions were being reversed. Crypto.com offered $10 in CRO, their cryptocurrency token, "for the inconvenience caused". Crypto.com halted Luna trading after discovering the issue, and it remains halted as of May 13.

The issue sounds quite similar to issues that affected various defi projects around the same time. Several projects who failed to account for unexpected Luna price data coming from blockchain oracles including Chainlink suffered major attacks.

Unexpected oracle data in the wake of Terra blockchain halt enables multiple attacks on other platforms

Earlier today, Terra halted their blockchain after a devastating few days. Subsequently, Chainlink's oracle paused the price feed, causing it to fall out of sync with the apparent market price of the token. This enabled multiple attacks on various platforms.

$13.5 million was fraudulently borrowed from the Venus protocol on BSC. Blizz Finance on Avalanche reported their protocol had been entirely drained, amounting to around $8.3 million. Blizz subsequently announced in a post-mortem that "Blizz has no treasury or development fund and a significant portion of the stolen assets belonged to our team. As such we regret to announce the protocol has been paused and we do not intend to resume operations."

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