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LFG Slow-Walks Plan to Repay Small-Time Terra Holders, Citing Legal Threats
The Luna Foundation Guard still has about $100 million in reserves that it has pledged as compensation.
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.”
STORY CONTINUES BELOW
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10/ The Foundation is looking to use its remaining assets to compensate remaining users of $UST, smallest holders first.
— LFG | Luna Foundation Guard (@LFG_org) May 16, 2022
We are still debating through various distribution methods, updates to follow soon.
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.
Danny Nelson
Danny is CoinDesk's managing editor for Data & Tokens. He formerly ran investigations for the Tufts Daily. At CoinDesk, his beats include (but are not limited to): federal policy, regulation, securities law, exchanges, the Solana ecosystem, smart money doing dumb things, dumb money doing smart things and tungsten cubes. He owns BTC, ETH and SOL tokens, as well as the LinksDAO NFT.
Sam Kessler
Sam is CoinDesk's deputy managing editor for tech and protocols. His reporting is focused on decentralized technology, infrastructure and governance. Sam holds a computer science degree from Harvard University, where he led the Harvard Political Review. He has a background in the technology industry and owns some ETH and BTC. Sam was part of the team that won a 2023 Gerald Loeb Award for CoinDesk's coverage of Sam Bankman-Fried and the FTX collapse.
