Do Kwon was recently accused of withdrawing $80 million a month from the Terra ecosystem leading up to the crash — fresh allegations claim this happened more than 33 times, and a staggering $2.7 billion was taken out of the system through Degenbox by Abracadabra Money.
Do Kwon has publicly denied the allegations, calling them “categorically false,” after making his Twitter account public again.
The Allegations
According to the allegations, Do Kwon used Abracadabra.money and a staking loop that allows extreme levels of leveraging to withdraw the money as described by FatManTerra:
“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.”
The staking loop is also employed by other derivative tokens such as stETH. These advanced yield strategies offer insanely high rewards but create extremely volatile investments with ever-increasing liquidation risks. FatManTerra alleges that Do Kwon undertook such a strategy and thus gambled with the future of Terra for his own personal gain.
FatManTerra questioned how Do Kown could have sold the $80 million tranches of tokens he acquired without crashing the price of either $LUNA or $UST since there is a lack of liquidity to absorb the selling pressure.
However, FatManTerra claimed that Degenbox’s popularity had built up enough “near-immovable liquidity” that allowed Do Kwon to convert billions of $UST for $MIM.
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
— FatMan (@FatManTerra) June 11, 2022
Do Kwon then allegedly sold the $MIM tokens for $USDC and $USDT.
Do Kwon once claimed:
“If you keep on using centralized, stable coins eventually they are going to rug you… so you might as well start using UST.”
It is highly unusual that Do Kwon, who has publicly stated that investors should only trust decentralized stablecoins such as $UST, would purchase either $USDC or $USDT.
The below image shows the value of $MIM tokens that were converted into centralized stablecoins. These tokens were then sent to exchanges such as Binance, KuCoin, and Huobi to cash out.
The data was analyzed by @fozzydiablo and can be viewed on Dune. FatManTerra allows for the benefit of the doubt and accepts that some of the money could theoretically have gone to Luna Foundation Guard. He ended his thread with a demand for “proper transparency and accountability.”
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)— FatMan (@FatManTerra) June 11, 2022
Do Kwon’s public response
CryptoSlate reached out to Do Kwon directly for clarification on the allegations, but he declined to comment and shared an email address for Terraform Labs’ comms team instead.
Do Kwon posted a public denial on Twitter.
1/ This should be obvious, but the claim that I cashed out $2.7B from anything is categorically false
— Do Kwon
(@stablekwon) June 12, 2022
He said people are making contradictory allegations regarding his holdings and spreading “falsehood,” which only “adds to the pain of everyone who has lost.”
Do Kwon clarified that his only income in the last two years has been a nominal cash salary from TFL and that he chose to defer taking his founder’s tokens to avoid “unnecessary finger pointing.”
3/ To reiterate, for the last two years the only thing ive earned is a nominal cash salary from TFL, and deferred taking most of my founder’s tokens because a) didn’t need it and b) didn’t want to cause unnecessary finger pointing of “he has too much”
— Do Kwon
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