One of crypto’s most tragic events will be the Terra (LUNA) collapse. Billions lost their lives savings and investments. One small group of insiders was able to profit from this crisis.
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According to a report from Arcane Research analyst Anders Helseth, the Terra (LUNA) ecosystem, now known as Terra Classic, operated as a long-term “pump and dump” scheme.
An analyst looked at on-chain activity in support of his claims. He found revealing details on the distribution of LUNC value and inflows as well how the token supply moved between addresses and exchange platforms starting from 2020 until a few hours before the crash.
The analyst called the Terra Classic ecosystem the “perfect exit liquidity” for early LUNA holders. This scheme was supported by the high popularity in the Anchor Protocol, the UST (Terra Classic’s algorithmic stablecoin) and LUNA mint mechanism, and this token’s supply.
As seen below, the LUNA supply was “highly concentrated” by Terraform Labs (TFL), Terra Classic’s developing company co-founded by Do-Kwon. TFL had 537 million LUNA tokens, excluding exchange platforms as of October 3, 2020.
The analyst claims unidentified wallets founded by Terraform Labs, the largest LUNC holder, moved their funds to “bridges and centralized exchanges”. The funds began moving in late 2020 and “frequently” saw transactions from TFL to as many as 3,000 unidentified wallets.
In total, $6 billion was recorded in net outflows between Terraform Labs and these wallets/exchanges. As seen below, these funds were later transferred to the “others” group of wallets.
In other words, according to the analyst’s research, Terraform Labs seemed to have moved their LUNA supply to exchanges where they were bought by retail investors. The “others” wallets saw $6.5 billion in net inflows.
Do Early Investors Make Billions from the LUNA Brash?
The analyst thinks that $6.5 billion represents the TFL profit and the early LUNC investors. However, the analyst claims the figure could be higher. According to the report, these figures are:
Therefore, we have reason to believe that the potential for creating outside profits was larger than the $6 billion net flow that’s calculated based on the assumption that portions of the early deposits of LUNAto exchanges were not sold.
Thus, the report claims the Terra Classic ecosystem, levering the popularity and the upside volatility on the price of LUNA (LUNC), created “exit liquidity” for these investors. According to the analyst, the alleged mechanism which allowed early LUNC investors transfer value to retail investors was the reason for the report:
By pumping the LUNA token, the burn/mint mechanism, and creating a sustained demand for the UST token through Anchor, the perfect exit liquidity for large LUNA bags was created (…). The profits are best described as collateral wins in an unsuccessful bootstrapping effort.
May 31, 2020 Crypto Market Report| Daily Pump & Dump | May 31, 2022 Crypto Market Report
LUNA is trading at $9 as of the writing. There has been a 3% drop on the 4 hour chart.
