What Happened to the $3.5B Terra Reserve?

Blockchain analytics firm Elliptic follows the money to major exchanges Gemini and Binance.

AccessTimeIconMay 14, 2022 at 8:50 p.m. UTC
Updated May 11, 2023 at 5:43 p.m. UTC
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Where’d that $3.5 billion go?

Unless you’ve been off the grid for the last couple weeks, you likely already know the $3.5 billion bitcoin (BTC) reserve that was amassed, in part, to defend and support the terraUSD (UST) stablecoin, which proved to be anything but. However, while it’s clear that untold billions in value and wealth were lost when those reserves proved inadequate to prevent a depegging, what no one knows is what happened to those reserves and where they are now.

Terra Labs CEO Do Kwon has said via Twitter that documentation regarding the use of the reserves during the depegging event would be forthcoming. Where the bitcoin is held and how it was used will be vital for investors seeking to recoup losses suffered through their exposure to UST, according to Tom Robinson, co-founder and chief scientist of Elliptic, a blockchain analytics firm.

While it’s uncertain when Terra will release that documentation, Robinson said his firm has been following the money: some 80,394 BTC, worth $3.5 billion when purchased by the Luna Foundation Guard, the non-profit organization set up to promote the growth of the Terra ecosystem, between January and May this year.

When the value of UST began to drop at the start of last week, LFG announced it would begin to dispose of its bitcoin reserves and purchase UST. On the morning of May 9, LFG announced that it would “Loan $750M worth of BTC to OTC trading firms to help protect the UST peg.” Terra creator Do Kwon later clarified that the bitcoin would be “used to trade.”

At around the same time, 22,189 BTC (worth ~$750 million at this time) was sent from a bitcoin address linked to LFG, to a new address, Elliptic pointed out in a blog post. Later that evening a further 30,000 BTC (worth ~$930 million at the time) was sent from other LFG wallets, to this same address.

LFG/ Gemini (Elliptic)
LFG/ Gemini (Elliptic)

Within hours, the entirety of this 52,189 BTC was moved to a single account at U.S. crypto exchange Gemini, via several bitcoin transactions, according to Elliptic.

The purpose of having a very large reserve of bitcoin was potentially to purchase UST to push the price back up toward $1, which is probably the reason it was sent to exchanges. However, it’s not possible using the blockchain alone to identify whether it was sold to support the UST price, Elliptic’s Robinson said.

This left 28,205 BTC in Terra’s reserves. At 1 a.m. UTC on May 10, those remaining reserves were moved in their entirety, in a single transaction, to an account at the cryptocurrency exchange Binance. Again, it is not possible to identify whether these assets were sold or subsequently moved to other wallets, Robinson said.

LFG/Binance (Elliptic)
LFG/Binance (Elliptic)

“All we can see is it going into these exchanges,” Robinson told CoinDesk. “We can’t really see how it’s been used. It might have been sold, it might be being stored on the exchanges, it might have been withdrawn again and might be an unhosted wallet.”

UPDATE (May 16, 21:20 UTC): Edits second paragraph for clarity.


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Ian Allison

Ian Allison is an award-winning senior reporter at CoinDesk. He holds ETH.

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