Recently, a feud brewing failed USN stablecoin has come to light, involving a public disagreement between Wintermute, the maker of the stablecoin, and the Near Foundation. The conflict surfaced over a substantial amount of USN, a stablecoin that operated on the NEAR blockchain, which was discontinued after it lost its peg last year.
A Controversial Transaction
Wintermute CEO, Evgeny Gaevoy, accused the Near Foundation of reneging on a redemption agreement after Wintermute assisted in the liquidation of 11.2 million USN from the FTX bankruptcy estate. According to Gaevoy, they had entered into the transaction with the belief that they could redeem USN for USDT on a 1-to-1 basis. This confidence was instilled by public statements made by the Near Foundation and private assurances from Aurora Labs, which confirmed they could facilitate the redemption. However, the Near Foundation has allegedly refused to honor the redemption, offering to transfer only 20% of the total amount. Wintermute is now considering legal action after suffering “direct harm.”
The Near Foundation’s Response
In response to Gaevoy’s accusations, the Near Foundation claimed that Wintermute was attempting to exploit a system intended to compensate regular users for profit. They stated that Aurora was not fully informed about the USN tokens Wintermute wanted to redeem and only confirmed that a large redemption could be facilitated in theory. Once Aurora discovered that the tokens were linked to Alameda Research, it raised concerns about potential AML/KYC issues tied to the history of those funds and the ongoing Alameda estate liquidation process. The Near Foundation also argued that Wintermute’s redemption request was inconsistent with the original spirit and intent of the program.
The USN Depreciation
The USN stablecoin lost its peg in October last year due to extreme market conditions and a code deficiency that led to some double-minting of USN. To prevent a Terra/Luna-like collapse and to compensate users, the foundation pledged to fill a $40 million gap in reserves by providing the funds to Aurora, a smart contract project on NEAR. Initially, USN’s design was similar to UST (Terra), as it was an algorithmic stablecoin pegged to the price of its sister coin, NEAR. However, after the Terra/Luna crash, this was changed, and USN became backed by USDT.
Wintermute is known for making substantial profits from arbitrage between Terra and Luna as these cryptocurrencies were crashing last spring. According to Forbes, the firm traded more than $250 million of it all the way down to about $0.10 a token. This ongoing dispute is a reminder of the potential risks and uncertainties in the crypto market. To keep track of such developments, consider using applications like cryptoview.io, which provide comprehensive insights into the crypto world.
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Please note: The information provided in this article is for informational purposes only and should not be considered as financial, legal, or tax advice.
