How Do Kwon Allegedly Cashed Out $2.7B From Terra Network

Source: Computerhoy

Barely a month after the almost unprecedented collapse of the Terra ecosystem, controversies surrounding the crash have continued to emerge. 

In the latest of these controversies, an allegation has emerged that the Chief Executive Officer of Terraform Labs, Do Kwon, cashed out about $2.7 billion from the Terra Network before the crash. 

This allegation against Kwon, who is already facing investigations from the United States Securities and Exchange Commission (SEC) and the Seoul Metropolitan Police, was made by FatMan Terra.

FatMan, in a series of tweets on Saturday, claimed that Kwon was able to succeed through the help of Degenbox, a borrowing protocol that enables users to loop stablecoin buys.

He noted that Degenbox gave the billionaire the perfect mechanism to drain liquidity out of the LUNA & UST system and into hard money like USDT. 

He continued that the importance of Degenbox to Kwon’s action is irreplaceable because he is a billionaire with low liquidity, he can’t just extract $2b from LUNA to USD without causing a major crash. 

To increase liquidity (by creating enticing APYs), CVX bribes in the form of SPELL rewards were distributed to people voting for the pool’s gauge through Votium. Essentially, SPELL was picking up the tab for providing deeper exit liquidity to the UST pair.

He noted that this strategy soon began to deplete the yield reserve because it was adopted by many Terra influencers, including thousands of retail users, who wanted to access the high yields. 

However, despite the obvious threat to Anchor’s long-term sustainability, he wrote that Do Kwon didn’t care. 

This created incredibly thick, near-immovable liquidity near the top of the peg zone (the $0.98 to $1.00 range). In a nutshell, it would allow for someone to cash out billions of UST for MIM at a 1:1 rate without disturbing the peg – all thanks to inorganic demand.

FatMan also claimed that $558m went to KuCoin, $1.08b to Binance, and $545m to Huobi. 

“Ultimately, all of this money is liquidity being removed from the Terra ecosystem, exacerbating the collapse, bolstering TFL coffers – all while they lied to your face,” he added.