An effort to compensate Terra owners with assets from Luna Foundation Guard (LFG), which spent billions of dollars fruitlessly defending the failed stablecoin’s peg, is frozen in place due to the threat of litigation, LFG tweeted Friday.
“Our goal is to distribute LFG’s remaining assets to those impacted by the depeg, smallest holders first,” LFG tweeted. “Unfortunately, due to ongoing and threatened litigation, distribution is not possible at this time. While these matters are outstanding, there can be no timeline established for resolution.”
According to figures self-reported from LFG, the foundation’s reserve’s currently total around $100 million. That’s a drop in the bucket of the estimated $60 billion in value wiped out by the collapse of the Terra ecosystem.
Although LFG cited legal reasons for pausing its treasury distribution plans, Friday's statement comes after reports that South Korean authorities had frozen nearly $40 million worth of blockchain funds tied to LFG. "I don't know whose funds they've frozen, but good for them, hope they use it for good," Terra founder Do Kwon tweeted in response.
LFG was established by Terra creators Terraform Labs in January with a mandate to protect the $1 peg of terraUSD (UST), Terra's ill-fated algorithmic stablecoin. LFG's treasury was loaded with bitcoin and other currencies totaling close to $4 billion, but it “loaned” virtually all of those funds to over-the-counter trading firms in May in a failed bid to rescue UST as it was crashing. To whom and how those funds were distributed remains unclear.
LFG previously had a five-person governance council but they’ve all left in the wake of the collapse. Now, former LFG council members Jose Macedo and Remi Tetot tell CoinDesk that the board only formally consists of Do Kwon and Terraform Labs head researcher Nicholas Platias.
UPDATE (Oct. 7, 2022 17:03 UTC): Adds context on LFG council.
UPDATE (Oct. 7, 17:34 UTC): Adds context on LFG's mandate and October's LFG-linked asset freeze.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.