Terra Founder Accuses SBF Of Attacking UST Peg With $1B UST From Genesis

Terra Founder Accuses SBF Of Attacking UST Peg As FTX CEO Faces Market Manipulation Investigations.

TFL founder Do Kwon, emboldened by a New York Times article, has made some serious allegations against SBF with links to Genesis Trading and Voyager.

Terraform Labs founder Do Kwon, in a series of tweets today, has accused Sam Bankman-Fried of intentionally dumping $1 billion TerraUSD (UST) and billions of Bitcoin to de-peg UST and weaken Luna Foundation Guard (LFG) reserves.

I think the time has come for @GenesisTrading to reveal if they provided the $1B UST shortly before the crash to SBF or Alameda – the purchase from LFG was represented as stemming from “interest to participate in the Terra Defi ecosystem” – not to provide ammo for a peg attack

— Do Kwon ? (@stablekwon) December 8, 2022

Notably, the tweets came in response to a New York Times article that reported that SBF is currently facing market manipulation investigations for a possible role in the Terra collapse.

“U.S. prosecutors in Manhattan are examining the possibility that Mr. Bankman-Fried steered the prices of two interlinked currencies, TerraUSD and Luna, to benefit the entities he controlled, including FTX and Alameda Research, a hedge fund he co-founded and owned,” the New York Times wrote citing anonymous sources with knowledge of the matter.

It bears mentioning that the investigation is still in its early stages, and investigators have not conclusively proven anything, as the New York Times highlighted. Nevertheless, per the report, it is part of a broader investigation into the FTX collapse.

Kwon, on Twitter today, expressed the belief that the report was likely on to something as he suspects that FTX or Alameda took out a $1 billion UST loan from the now embattled Genesis to attack the UST peg. In addition, Kwon claims that at about the same time, Alameda borrowed billions in Bitcoin from Voyager to dump on the market and weaken LFG’s Bitcoin reserves.

Furthermore, the TFL founder asserts that it is not the first time Alameda has targeted UST. For example, Kwon said that in February 2021, UST faced a “currency contraction” due to a rapid 500 million UST dump by Alameda.

“What’s done in darkness will come to light,” the TFL founder surmises.

It is worth noting that SBF is no stranger to arbitrage trades against stablecoins. For example, at the height of the FTX collapse, Alameda opened massive shorts on Tether (USDT), temporarily de-pegging the stablecoin in what many believed to be an effort to make all their losses back in one trade.

Crypto Twitter Responds 

Unsurprisingly, Kwon’s comments attracted a flurry of responses from crypto community members.

Algod (@AlgodTrading), who predicted the UST de-peg and gained notoriety by betting against Do Kwon in response to the TFL founder today, asserted Luna was bound to fail regardless of an attack. “Attack or not, Luna would have collapsed by now,” Algod tweeted.

Gokhstein Media founder David Gokhstein while indicating that he was no fan of Kwon, revealed that he believed the sequence of events highlighted by Kwon was plausible. “I don’t want to believe Do Clown, but I can see this happening,” Gokhstein tweeted.

Meanwhile, others noted that should Kwon’s claims hold up, FTX triggered a series of events that ultimately led to its collapse.

Accusations Run Rampant 

Notably, all of these come within 24 hours of Terra whistleblower FatMan asserting that he had found conclusive proof that TFL triggered the ecosystem collapse. According to FatMan, sharing on-chain data, TFL sold about $450 million UST in the open market weeks before the collapse, weakening UST liquidity. The Terra whistleblower does not believe this is a mistake or coincidence, but Kwon and his allies cashing out as much as possible in anticipation of the collapse.

However, not everyone buys this analogy. The Block’s Tim Copeland poked holes at the argument, wondering why TFL would cash out $450 million only to spend $2.8 billion to try to save the peg. 

Meanwhile, another user, RyanLion (@TheRyanLion), who FatMan promptly blocked, pointed out that contrary to FatMan’s claims, these sales lined up with Bitcoin purchases by the LFG to defend the peg. However, it is worth noting that, like FatMan, he believes it was not wise to sell in the open market. 

“UST’s final death blow could have been struck by anyone,” FatMan asserted as he believes that the TFL sale was “irresponsible” and put UST in a vulnerable position.

No Closure Yet For Terra Investors

The Terra ecosystem collapse in May wiped out at least $60 billion in investors’ funds and triggered a market-wide contagion hurting all crypto investors. 

Even after almost seven months, the actual reason for the collapse remains to be determined. However, following the collapse, many have laid the blame at the feet of Do Kwon, TFL, and the LFG. The fact that South Korean authorities have issued a warrant for Do Kwon’s arrest has also helped strengthen these narratives. 

Meanwhile, Kwon has continued to defy South Korean prosecutors, maintaining that he had no part in any wrongdoing.