What happened
Terraform said one UST could always be exchanged for US$1 of LUNA and vice versa. When UST fell below 92 cents in May 2021, its founder arranged for a trading firm to secretly buy UST to restore the peg, then credited the algorithm, according to the US Department of Justice.
UST was marketed as yield-bearing, paying as much as 20% through the Anchor protocol, according to the SEC. In May 2022, UST de-pegged and the price of it and its sister tokens fell close to zero.
Founder Do Kwon pleaded guilty to fraud on August 12, 2025 and was sentenced to 15 years on December 11, 2025.
Scale, from official records
- Combined UST and LUNA market value over US$50 billion at the peak; over US$40 billion in investor losses (US DOJ, 2025-12-11)
- Yield of up to 20% on UST through Anchor (US SEC, 2023-02-16)
The Canadian angle
No Canadian regulator statement names Terra. In December 2022 the CSA said stablecoins may be securities or derivatives, and since February 2023 Canadian platforms may not let clients buy stablecoins without CSA consent.
What broke
A reflexive algorithmic peg backed by a volatile sister token, unsustainable yield, an earlier de-peg hidden by secret support, and a supposedly independent reserve controlled by the founder.
What a user could have checked
- What backs the stablecoin: cash, or a volatile token?
- Whether the advertised yield could last and where it came from.
- Whether 'independent' reserves were controlled by the issuer.
Recovery
No recovery figure confirmed on an official page.
Sources
- Crypto-enabled fraudster sentenced for orchestrating $40 billion fraud — US Attorney's Office, SDNY, 2025-12-11
Supports: Mechanism, secret May 2021 support, >$50B peak, >$40B losses, sentence · checked 2026-11-01 - SEC charges Terraform and CEO Do Kwon — US Securities and Exchange Commission, 2023-02-16
Supports: Anchor up to 20%; May 2022 de-peg to near zero · checked 2026-11-01 - Do Kwon pleads guilty to fraud — US Attorney's Office, SDNY, 2025-08-12
Supports: Plea · checked 2026-11-01