The Collapse of the Terraform Ecosystem: How It All Came Crashing Down

c. May 2022 Collapse of the Terraform Ecosystem

169. In May 2022, UST de-pegged from the U.S. dollar again. This time UST's price did not recover. Several factors contributed to the crash, including the sale of large amounts of UST by one or more sophisticated trading firms beginning on or about May 7, 2022. The algorithm failed to maintain the peg for UST, and its price fell to near zero, as did the prices of Terraform's other crypto assets.

170. By the end of May 2022, UST, LUNA, wLUNA and MIR were essentially worthless, wiping out more than $40 billion in combined market value.

171. Domestic institutional investors experienced billions of dollars in losses in market valuations. Countless retail investors lost their life savings and ended up in debt as a result of the collapse. For example, a pharmacist in California borrowed $400,000 against the value of his home to purchase UST and lost his entire investment. A painter in Vermont invested $20,000 in UST set aside for his son's college education, but lost it all when the Terraform ecosystem collapsed.

172. Defendants still retain valuable proceeds from the Terraform ecosystem. Specifically, Defendants transferred over 10,000 Bitcoin from Terraform and Luna Foundation Guard crypto asset platform accounts to an un-hosted wallet, or "cold" wallet (i.e., a self-custody wallet that is not on any exchange).

On a periodic basis since May 2022, Terraform and Kwon have transferred - and continue to transfer - Bitcoin from this wallet to a financial institution based in Switzerland and have converted the Bitcoin to cash. Between June 2022 and the date of this complaint, over $100 million in fiat currency has been withdrawn from the Swiss bank.