Terra Founder Says LUNA Not Responsible for FTX, 3AC Crash

Terra founder Do Kwon comes up to counter claims that the Terra collapse resulted in the crash of notable entities such as 3AC and FTX.

Prominent cryptocurrency developer and co-founder of Terraform Labs Do Kwon has come up to dispute circulating claims that the fall of his crypto ecosystem birthed a contagion that resulted in the crash of several crypto entities, including Three Arrows Capital (3AC), Celsius, Voyager, and most recently, FTX.

Kwon, in a tweet, noted that there remains no evidence that the embattled FTX had any exposure to LUNA. He highlighted an instance where the exchange denied being exposed to the collapsed Terra assets.

Do Kwon further mentioned that the now-defunct crypto hedge fund 3AC only had $109M worth of LUNA despite having a balance sheet worth billions of dollars, suggesting that their LUNA holding was incapable of affecting them in a manner that would lead to their downfall. Kwon also pointed out that 3AC had no UST holdings.

3AC, which had assets worth about $10B under management in March, revealed a $200M exposure to LUNA following the Terra fall. Reports speculated that this exposure was as high as $560M.

Because the exposure was a mere fraction of the hedge fund’s total AuM, Kwon believes the Terra collapse was not the primary cause of its crash.

“Miles – respectfully, this isn’t supported by evidence. First off, there is no evidence that FTX had exposure to LUNA (they denied it), and 3AC bought 109M worth of Luna from a multibillion dollar balance sheet and afaik had no exposure to ust.

Let’s try to stick to facts,” the South Korean developer said in a tweet Thursday.

Miles – respectfully, this isn't really supported by evidence. First off, there is no evidence that FTX had exposure to LUNA (they denied it), and 3AC bought 109M worth of Luna from a multibillion dollar balance sheet and afaik had no exposure to ust

Let's try to stick to facts

— Do Kwon ? (@stablekwon) November 10, 2022

It is worth noting that Kwon’s recent remarks came as a response to Australian crypto analyst and notable influencer Miles Deutscher. Deutscher had on Thursday taken to Twitter to reiterate circulating claims of the Terra collapse leading to the prevailing woes the crypto space is facing.

“LUNA collapsing caused all this,” Deutscher said in a tweet, as he listed 3AC, Celsius, Voyager, and FTX as some of the entities which have suffered from the crash of Kwon’s Terra. He further asserted that the damaging effects of the Terra debacle are likely to persist in space for a long time.

Following Kwon’s response, Deutscher admitted that neither Terra nor Kwon was directly responsible for the FTX fiasco, “…as SBF is responsible for his own decisions,” he added. Notwithstanding, he insisted that the UST crash triggered “an unfortunate series of events.” “Irrespective of whether FTX had direct exposure, there’s systemic exposure via the subsequent effects UST’s collapse had on the entire industry,” Deutscher noted in a separate tweet.

Additionally, crypto influencer BitBoy asserted in response to Deutscher that SBF and Alameda are responsible for all the fiascos the crypto scene is facing this year. He noted that he hopes to reveal some concrete evidence to back up his allegations soon.

“I understand why you believe this. But it goes back to what caused LUNA. SBF/Alameda was behind EVERY SINGLE crash/collapse this year. Even target was a Solana/FTX competitor. Think about it. Hopefully going to deliver hard evidence on this soon,” he said, responding to Deutscher.

Recall that BitBoy alleged sometime in October – before the FTX insolvency concerns came to the limelight – that Coinbase chief Brian Armstrong and FTX’s SBF are out to ruin crypto in an evident outburst.

As reported by The Crypto Basic, data suggest that FTX found itself in this position only because it bailed out Alameda in the aftermath of the LUNA collapse using FTT as collateral, and for a good reason; had FTX let Alameda implode in May, their collapse would have ensured the subsequent liquidation of all FTT tokens vested in September. It would have been terrible for FTX, so they had to find a way to avoid this scenario. The bailout of its sister firm, Alameda, likely put a dent in FTX’s balance sheet to the point where it was no longer solvent. This would have been fine if the price of FTT hadn’t collapsed, resulting in a bank run.

It is worth noting that 3AC’s crash triggered a contagion that led to the bankruptcy of crypto brokerage entity Voyager Digital, as the hedge fund could not pay back the loan of over $670M it owed Voyager. While 3AC’s collapse followed shortly after the fall of Terra, the hedge fund’s crash has been majorly linked to poor risk management strategies, wrong trading decisions, and poor investment choices.