Trust Score pending calculation
Key Facts
- Peg Currency
- USD
- Backing Type
- Algorithmic
- Audit Frequency
- None
- Reserve Ratio
- N/A
Global Regulatory Status
Reserve Attestation
No attestation data available
This stablecoin does not publish regular reserve attestations.
On-chain verification available:
Redemption
- Direct Redemption
- No
- No direct issuer redemption mechanism
- Redemption via LUNA arbitrage (mechanism failed May 2022)
- Exit via secondary markets only post-collapse
Chain Support
Legal & Enforcement History
US Bankruptcy Court
•InvestigationJanuary 21, 2024
Key Allegations
- •Chapter 11 bankruptcy filing by Terraform Labs
Resolution
Terraform Labs filed for Chapter 11 bankruptcy protection in Delaware. Assets listed: $79 million; liabilities: $449 million.
Interpol
•InvestigationMarch 23, 2023
Key Allegations
- •Violation of capital markets law in South Korea
Resolution
Interpol issued Red Notice for Do Kwon. He was arrested in Montenegro on March 23, 2023. Extradition proceedings ongoing between US and South Korea requests.
SEC
•LawsuitFebruary 16, 2023
Key Allegations
- •Offering and selling unregistered securities (UST, LUNA, MIR)
Resolution
Litigation ongoing as of February 2025. Do Kwon charged with securities fraud, wire fraud, commodities fraud, and conspiracy. Terraform Labs filed for Chapter 11 bankruptcy in January 2024.
Historical Timeline
8 events from 2022 to 2024
2022
Terra/Luna Death Spiral - Phase 2
According to on-chain data and academic analysis, the algorithmic stabilization mechanism entered a death spiral beginning May 10, 2022. The protocol minted LUNA tokens to absorb UST redemptions, causing LUNA supply to hyperinflate from 340 million to over 6.5 trillion tokens and rendering arbitrage stabilization economically unviable.
Terra/Luna Collapse - Algorithmic Stablecoin Failure
According to the SEC complaint dated February 16, 2023, TerraUSD (UST), an algorithmic stablecoin designed to maintain a $1.00 peg through arbitrage with the LUNA token, experienced a catastrophic collapse between May 7-13, 2022. The depeg initiated with large withdrawals from the Anchor Protocol, which held approximately $14 billion in UST deposits offering 20% yields. The algorithmic stabilization mechanism entered a death spiral, hyperinflating LUNA supply from 340 million to over 6.5 trillion tokens and resulting in an estimated $40-60 billion in total losses.
TerraUSD (UST) Initial Depeg - Phase 1
According to the SEC complaint dated February 16, 2023, TerraUSD (UST) began losing its $1.00 peg on May 7, 2022. Large withdrawals from the Anchor Protocol, which held approximately $14 billion in UST deposits at its peak, initiated selling pressure that the algorithmic stabilization mechanism could not absorb.
Terra/Luna Ecosystem Collapse
According to the SEC complaint dated February 16, 2023, TerraUSD (UST) depegged from its $1.00 target beginning May 7, 2022. The algorithmic stabilization mechanism, which relied on arbitrage between UST and LUNA tokens, failed under sustained selling pressure. UST price declined from $1.00 to approximately $0.17 within one week. LUNA token supply hyperinflated from approximately 340 million to over 6.5 trillion tokens as the protocol minted LUNA to absorb UST redemptions. The collapse resulted in an estimated $40+ billion loss of market value. According to the SEC, the Anchor Protocol, which promised 20% yields on UST deposits, held approximately $14 billion in deposits at its peak.
resolved2023
Interpol
Investigation
Violation of capital markets law in South Korea
SEC Charges Terraform Labs and Do Kwon with Securities Fraud
According to the SEC complaint dated February 16, 2023, Terraform Labs and Do Kwon were charged with offering and selling unregistered securities (UST, LUNA, MIR) and defrauding investors. The SEC alleged that the Anchor Protocol's 20% yields were misrepresented as sustainable when dependent on subsidies.
SEC
Lawsuit
Offering and selling unregistered securities (UST, LUNA, MIR)
2024
US Bankruptcy Court
Investigation
Chapter 11 bankruptcy filing by Terraform Labs
Financial Incidents
4 incidents recordedSEC Charges Terraform Labs and Do Kwon with Securities Fraud
HighFebruary 16, 2023 (occurred: May 7, 2022)
According to the SEC complaint dated February 16, 2023, Terraform Labs and Do Kwon were charged with offering and selling unregistered securities (UST, LUNA, MIR) and defrauding investors. The SEC alleged that the Anchor Protocol's 20% yields were misrepresented as sustainable when dependent on subsidies.
Details
On February 16, 2023, the SEC filed a complaint against Terraform Labs and Do Kwon in the Southern District of New York. According to the complaint, the defendants offered and sold unregistered securities including UST, LUNA, and MIR tokens. The SEC alleged that Terraform Labs and Do Kwon misled investors about the sustainability of the Anchor Protocol's 20% yields, which the complaint states were subsidized by Terraform rather than generated through lending activities. The complaint further alleged that Do Kwon misrepresented the use of the Chai payment application, claiming it processed transactions on the Terra blockchain when it allegedly used traditional payment rails. Do Kwon was arrested in Montenegro on March 23, 2023, on an Interpol Red Notice. As of February 2025, extradition proceedings between US and South Korean requests remain ongoing, and Terraform Labs filed for Chapter 11 bankruptcy in January 2024.
Customer Impact
No direct additional financial impact beyond the collapse itself. The legal proceedings determine whether investors may recover funds through regulatory action.
Issuer Response
Terraform Labs denied the allegations and filed for Chapter 11 bankruptcy protection on January 21, 2024, listing assets of $79 million against liabilities of $449 million. Do Kwon contested extradition from Montenegro.
Related Events
Sources
Terra/Luna Death Spiral - Phase 2
CriticalMay 10, 2022
According to on-chain data and academic analysis, the algorithmic stabilization mechanism entered a death spiral beginning May 10, 2022. The protocol minted LUNA tokens to absorb UST redemptions, causing LUNA supply to hyperinflate from 340 million to over 6.5 trillion tokens and rendering arbitrage stabilization economically unviable.
Details
Beginning May 10, 2022, the Terra protocol's algorithmic stabilization mechanism collapsed into a death spiral. As UST holders exited to LUNA through the protocol's mint/burn mechanism, the supply of LUNA tokens hyperinflated from approximately 340 million to over 6.5 trillion tokens within days. According to on-chain analysis published by Nansen and academic research, the arbitrage mechanism designed to maintain the $1.00 peg became economically unviable as LUNA's price declined to near-zero. By May 12, 2022, UST had fallen to approximately $0.17 and the Terra blockchain was halted. The Luna Foundation Guard's remaining reserves, estimated at over $80 million in AVAX and LUNA, were insufficient to restore stability. The collapse resulted in an estimated $40+ billion loss of market value across the Terra ecosystem.
Customer Impact
All UST holders experienced near-total loss of value, with UST trading at approximately $0.17 or lower. LUNA token holders experienced hyperinflationary dilution rendering holdings effectively worthless. Users who had deposited UST in the Anchor Protocol could not withdraw funds due to protocol limitations and depleted yield reserves.
Issuer Response
Terraform Labs halted the Terra blockchain on May 12, 2022 to prevent governance attacks. Do Kwon announced a plan to fork the Terra blockchain, abandoning the original UST mechanism. The Luna Foundation Guard depleted its remaining reserves without successfully restoring the peg.
Related Events
Sources
Terra/Luna Collapse - Algorithmic Stablecoin Failure
CriticalMay 7, 2022
According to the SEC complaint dated February 16, 2023, TerraUSD (UST), an algorithmic stablecoin designed to maintain a $1.00 peg through arbitrage with the LUNA token, experienced a catastrophic collapse between May 7-13, 2022. The depeg initiated with large withdrawals from the Anchor Protocol, which held approximately $14 billion in UST deposits offering 20% yields. The algorithmic stabilization mechanism entered a death spiral, hyperinflating LUNA supply from 340 million to over 6.5 trillion tokens and resulting in an estimated $40-60 billion in total losses.
Details
The Terra/Luna collapse occurred over six days in May 2022. Beginning May 7, 2022, large withdrawals from the Anchor Protocol created sustained selling pressure on UST. According to the SEC complaint dated February 16, 2023, the Anchor Protocol's 20% yields were subsidized by Terraform Labs rather than generated through lending activities. By May 9, 2022, UST had depegged to approximately $0.98, and the Luna Foundation Guard deployed approximately $2.2 billion in Bitcoin reserves to defend the peg. On May 10, 2022, the protocol entered a death spiral: the arbitrage mechanism minted LUNA tokens to absorb UST redemptions, causing LUNA supply to hyperinflate from approximately 340 million to over 6.5 trillion tokens within days. By May 12, 2022, UST had fallen to approximately $0.17 and the Terra blockchain was halted to prevent governance attacks. Major exchanges including Binance and Coinbase delisted UST and LUNA on May 13, 2022. The collapse resulted in an estimated $40-60 billion in losses across retail and institutional investors.
Customer Impact
UST holders experienced near-total loss of value, with UST trading at approximately $0.17 or lower by May 12, 2022. LUNA token holders experienced hyperinflationary dilution rendering holdings effectively worthless. Anchor Protocol depositors, who had deposited approximately $14 billion at peak, could not withdraw funds as the protocol's yield reserve depleted. The collapse affected investors across multiple jurisdictions including the United States, South Korea, Singapore, and globally.
Issuer Response
Terraform Labs and the Luna Foundation Guard deployed approximately $2.2 billion in Bitcoin reserves to market makers in an unsuccessful attempt to stabilize the peg. On May 12, 2022, Terraform Labs halted the Terra blockchain to prevent governance attacks. Do Kwon subsequently proposed forking the Terra blockchain, abandoning the original UST mechanism. Terraform Labs filed for Chapter 11 bankruptcy protection on January 21, 2024, listing assets of $79 million against liabilities of $449 million. Do Kwon was arrested in Montenegro on March 23, 2023, on an Interpol Red Notice; extradition proceedings between US and South Korean requests remain ongoing as of January 2026.
Related Events
Sources
TerraUSD (UST) Initial Depeg - Phase 1
CriticalMay 7, 2022
According to the SEC complaint dated February 16, 2023, TerraUSD (UST) began losing its $1.00 peg on May 7, 2022. Large withdrawals from the Anchor Protocol, which held approximately $14 billion in UST deposits at its peak, initiated selling pressure that the algorithmic stabilization mechanism could not absorb.
Details
Beginning May 7, 2022, TerraUSD (UST) experienced significant selling pressure that caused it to deviate from its $1.00 target peg. According to the SEC complaint filed February 16, 2023, large withdrawals from the Anchor Protocol, which offered approximately 20% yields on UST deposits and held an estimated $14 billion at its peak, created sustained redemption pressure. The Luna Foundation Guard deployed approximately $2.2 billion in Bitcoin reserves in an attempt to stabilize the peg, but selling pressure continued. By May 9, 2022, UST had declined to approximately $0.80.
Customer Impact
UST holders experienced immediate loss of peg stability. Those who exited during this phase recovered approximately $0.80-0.95 per UST. Anchor Protocol depositors withdrawing faced liquidity constraints as the protocol's yield reserve depleted.
Issuer Response
Terraform Labs and the Luna Foundation Guard deployed approximately $2.2 billion in Bitcoin reserves to market makers and exchanges in an attempt to stabilize the peg. The LFG announced a plan to restore the peg through reserve deployment and protocol adjustments.
Sources
Audit History
No auditor change history on record
Current auditor: Not disclosed
Historical Controversies
According to the SEC complaint dated February 16, 2023, TerraUSD (UST) depegged from its $1.00 target beginning May 7, 2022. The algorithmic stabilization mechanism, which relied on arbitrage between UST and LUNA tokens, failed under sustained selling pressure. UST price declined from $1.00 to approximately $0.17 within one week. LUNA token supply hyperinflated from approximately 340 million to over 6.5 trillion tokens as the protocol minted LUNA to absorb UST redemptions. The collapse resulted in an estimated $40+ billion loss of market value. According to the SEC, the Anchor Protocol, which promised 20% yields on UST deposits, held approximately $14 billion in deposits at its peak.
Issuer
- Terraform Labs Pte. Ltd.(sg • Private Limited Company)
- Luna Foundation Guard(sg • Non-profit (Dissolved))