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Some of you thought $80m per month was bad. That's nothing. Here's how Do Kwon cashed out $2.7 billion (33 x $80m!) over the span of mere months thanks to Degenbox: the perfect mechanism to drain liquidity out of the LUNA & UST system and into hard money like USDT. (1/13)
When you're a paper billionaire, it's hard to cash out. Dumping $2b LUNA for USD on the market will cause a major crash. Sure, Do Kwon can always use his 'burn/mint' printer to convert it all to UST - but how do you turn $2b of UST into real money without breaking the peg? (2/13)
Enter Abracadabra's Degenbox: a borrowing protocol where people can loop stablecoin buys. You can stake collateral to buy UST, put it into Anchor, then use your aUST to borrow more UST, put it into Anchor again... You get the drill. It's Anchor on steroids. (3/13)
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. (4/13)
Terra influencers shilled this strategy en masse, and thousands of retail users began flooding into Degenbox to access the high yields. Although this began quickly depleting the yield reserve, threatening Anchor's long-term sustainability, Do Kwon didn't care much. (5/13)
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. (6/13)
Here's the total amount of MIM Do Kwon was able to cash out through the MIM/UST pool - without even moving the peg! $2,719,132,772.01, to do with what he pleases. No need to dump LUNA or sell UST on exchanges - he drummed up liquidity from all of you. (7/13)pic.twitter.com/vRVve3WRsj
UST is the future, he said. Decentralized money is sound money, he said. UST won't depeg, he told you. 'Centralized stablecoins will rug you eventually.' So why did he cash out $2.7b from UST into USDT and USDC? Were all those words just lies? (Spoiler: yes.) (8/13)pic.twitter.com/JQTy5Bfm6z
Here are TFL's outflows. $558m to KuCoin, $1.08b to Binance, $545m to Huobi - you get the gist. 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. (9/13)pic.twitter.com/qpMe3NzEph
Maybe things work out in another universe. Maybe with an extra $2.7b in pools, UST wouldn't have depegged 30 days ago. Maybe without the constant lies and misrepresentations, retail wouldn't have lost this much. But in all of this it's hard to see any transparency. (10/13)
Even if we give them the benefit of the doubt and benignly assume the $2.7b went to LFG, what about the $1b and $1.5b raises? The amounts simply don't add up, and instead of leaving people to speculate, we implore for - and demand - proper transparency and accountability. (11/13)
Call to action: - Clarify the purpose of these huge trades. - Publish a PDF breaking down the sources of LFG funds, since they were meant for UST holders. - Publish trade logs and counterparties for the 'peg defence' (you have still provided zero evidence for any of it!) (12/13)
Credit for data, research, and thoughts all go to @fozzydiablo, who spotted this way back in January - sadly, enough people didn't see. https://twitter.com/fozzydiablo/status/1487191909948960776 … View all of the data & evidence here: https://dune.com/fozzydiablo/TFL-Exit-Liquidity … (13/13)
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