Evaluating only TerraForm Labs / LUNA’s profile at its peak — without knowing the outcome — the model ranked Fraud as the #1 likely cause. That’s exactly how it died.
Key Events Timeline
FOUNDING
TerraForm Labs / LUNA founded
FRAUD EXPOSURE
Fraud allegations surface
SHUTDOWN
Sudden Collapse: TerraForm Labs / LUNA ceases operations
Full Analysis
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Documented cause
TerraForm Labs built the Terra blockchain ecosystem around UST, an algorithmic stablecoin backed not by cash but by LUNA tokens. The mechanism relied on arbitrage incentives to maintain the $1 peg. In May 2022 a large coordinated sell pressure on UST triggered a death spiral: UST lost its peg, minting of LUNA to defend it hyperinflated the token, and $60B in combined market cap was destroyed in seventy-two hours. Do Kwon had allegedly been warned by his own team that the peg mechanism was fatally vulnerable. He was later arrested in Montenegro and charged with fraud in South Korea and the United States.
Lesson
“Any stablecoin mechanism that is vulnerable to a coordinated attack larger than its treasury is not a stablecoin. It is a casino paying the house from the players' chips.”