Do Kwon says that the collapse of the Terra ecosystem was probably triggered by an insider

In the interview, Do Kwon relived the darkest 6 days in May, when Luna dropped from $80 to less than $1, triggering a massive selloff in the crypto market.

Do Kwon believes there was a mole inside the team

The fall of the fourth largest cryptocurrency began with an unannounced transfer of funds between trading pools on the night of May 7. He left the Curve pool with an imbalance on Luna's side. This anomaly could have been corrected as it is not an entirely unusual phenomenon.

But in this case, things went from bad to worse, resulting in one of the most infamous network collapses in cryptocurrency history. In an interview, Do Kwon admitted that he believed there was a mole inside this team and that the crucial hit to the net came from an insider.

Within 13 minutes of the liquidity imbalance, some unknown traders sold $200 million of UST. This trend continued into the next morning, leaving the trading pool with a persistent imbalance and UST fluctuating from $1 to 99 cents. The UST lost its peg to the dollar, although the margin was not significant.

“The mood on Twitter started to turn sour… And then people started trading against Curve pools,” Kwon recalls of the morning after the big trade that exposed the liquidity crisis in the Terra Luna ecosystem.

Kwon was helpless, his executive team flying to Singapore to attend a quarterly meeting at Terraform headquarters. Kwon admitted that the timing of the fund transfer and the absence of key Terra executives due to a planned official engagement were inside information.

“The only people who knew were TFL staff…. So if you're asking me if there was a mole at Terraform Labs, there probably was."

The interview deals with other fundamental issues of the Terra Luna network. For example, the algorithmic pegging of UST-Luna, as opposed to stablecoins backed by hard cash, and why people should hold their dollars in UST when there is nothing as collateral, which led the network to make a big unviable bet on Anchor Savings Protocol, which promised a 20% annual return.

This catapulted Terra into the top league, but promising 20% returns was unviable. There was only one solution for the network to prevent it from going bankrupt - a continuous flow of funds to Anchor through greater adoption.

“When the anonymous traders struck on May 7, there were only 45 days left before Anchor needed another cash injection. And because it was all happening on a transparent blockchain, everyone could see the end of the road looming over there on the horizon.”

When a Terra community member suggested a $1 billion increase in April, Kwon replied, "That won't be enough."

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