Following the cataclysmic meltdown of the Terra ecosystem last week, the Luna Foundation Guard (LFG) has been accused of bailing out UST whales with its bitcoin trove before the project came crashing down.

The foundation allegedly allowed select UST holders and insiders to cash out their UST positions worth approximately $2.7 billion at close to $1 before the digital asset fell to less than 10 cents, leaving retail investors scratching their heads in losses.

LFG emptied its bitcoin stash last week in a bid to defend the UST’s peg. In a tweet thread earlier today, the non-profit organization confirmed that it had converted its BTC trove to UST to save the project.

The Foundation completed two transactions, one with a BTC/UST exchange rate of $32,334 and the other with an exchange rate of $35,054. 

While the LFG did not disclose the timeframe of these transactions, fresh data from Elliptic suggests the transactions were executed between May 9 and May 10. At that time, UST was trading at $0.60 and bitcoin’s price was hovering between $31,000 and $30,000.

“Within hours the entirety of this 52,189 BTC was subsequently moved to a single account at Gemini across several bitcoin transactions… This left 28,205 BTC in Terra’s reserves. At 1:00 am UTC on May 10th, this was moved in its entirety, in a single transaction, to an account at the cryptoasset exchange Binance,” Elliptic pointed out.

Thus, UST whales who had sold their holdings for the bitcoin offered by the LFG were able to exit the market at close to the face value of $1.

Elliptic added, “It is not possible to identify whether these assets were sold or subsequently moved to other wallets.”

LFG Denies The Accusations

The foundation has denied the accusations that it bailed out whales using its bitcoin stash. It said in a subsequent tweet, “there was never any deal for ‘insiders’ to exit. LFG funds were merely used squarely within its mandate to help protect UST peg.”

Several users, however, have called the LFG out and requested that it provide transaction receipts to back its claims. The project has pledged to compensate users with the remaining assets in its reserves.

The catastrophic failure of the Terra ecosystem last week has prompted global regulators to accelerate plans to regulate the stablecoins space.

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