Terra Labs, Luna Guard commission audit to defend against allegations of embezzlement

The audit tracked efforts to defend the UST anchor from May 8-12 and found no wrongdoing . LFG used the data to draw conclusions about frozen funds.

The Luna Foundation Guard (LFG) and Terraform Labs (TFL) commissioned a technical audit of their efforts to defend the price of TerraUSD (UST) - since renamed TerraUSD Classic (USTC) - between May 8-12. The audit was intended to respond to "allegations raised on social media" about the fate of funds transferred during efforts to defend the US dollar peg, according to the LFG blog.

The audit revealed that LFG spent 80,081 bitcoins (BTC) and $49.8 million in stablecoins (about $2.8 billion at the time) to defend the UST peg. This matched what LFG said in its May 16 tweets. Additionally, TFL spent $613 million defending the ankle. The audit was carried out by the American consulting firm JS Held.

LFG has concluded that the results of the audit show that there was no misappropriation of funds and that no funds were used for the benefit of insiders. Furthermore, LFG claimed that the audit dispelled the allegation that "LFG funds [were] frozen by law enforcement." Instead, "All LFG funds are held in self-hosted wallets, have not moved since the May 16 tweet, and have not been frozen."

1/ A third-party audit of LFG and TFL's peg defense activity in May 2022 has been published: https://t.co/3vwSBhQcNq — Do Kwon (@stablekwon) November 16, 2022

The final conclusion is not supported by the text and is interesting considering that South Korean police requested on May 23 that exchanges freeze funds linked to LFG. In September, South Korean authorities again asked exchanges KuCoin and OKX to freeze 3,313 BTC transferred from a wallet created on September 15 in the name of LFG.

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