The Terra Luna crash and how Terra Classic was born

What happened to LUNC, in short

LUNC is the original LUNA coin of the Terra blockchain. In the second week of May 2022, Terra's algorithmic stablecoin UST lost its link to the US dollar. The protocol tried to defend the peg by letting holders swap UST for newly minted LUNA, and that turned a wobble into a collapse. LUNA's total supply went from roughly 725 million coins on 7 May to about 6.9 trillion by 27 May, and a coin that had hit $119.18 in April was soon worth a fraction of a cent.

Validators halted the chain twice, exchanges suspended trading, and on 28 May a new chain called Terra 2.0 launched with a new LUNA. The old chain survived under the name Terra Classic, its coin was renamed LUNC and the stablecoin became USTC. The hero quest above gives you the five key days. Below we explain the mechanism, the numbers and the legal story that followed, up to Do Kwon's 15-year sentence.

How UST was meant to hold a dollar

Most stablecoins keep their peg because someone holds dollars or other assets in reserve. UST worked differently. The Terra chain had a built-in market module that always let you swap 1 UST for one dollar's worth of LUNA, and one dollar's worth of LUNA for 1 UST. The protocol minted the coin you received and burned the coin you handed in.

In theory, arbitrage kept the price in line. If UST traded at $1.02, traders could burn $1 of LUNA, mint 1 UST and sell it for a profit, which pushed UST back down. If UST fell to $0.98, they could buy it cheaply, burn it for $1 of freshly minted LUNA and sell that LUNA. Each trade nudged UST back to a dollar.

The weak spot is hidden in the second case. Defending the peg from below means printing LUNA, and the value of that LUNA depends on people wanting to buy it. As long as LUNA's market value was much larger than the UST supply, the system looked stable. Once confidence in UST cracked, the protocol had only one tool: print more of a coin whose price was already falling. Our guide to what LUNC is covers how the surviving chain works now that this mechanism is switched off.

Anchor and the demand for UST

A stablecoin needs a reason to be held. For UST, the main reason was Anchor Protocol, a lending app on Terra that paid depositors a high and unusually steady yield on UST savings. Depositors received a receipt token called aUST. That yield was a major reason to hold UST at all, and it attracted many people who mostly wanted a savings account, not exposure to an experiment.

The problem was concentration. When so much UST sat in one app, sentiment about Anchor and about UST became the same thing. As UST slipped, Anchor depositors rushed to withdraw and sell, which added selling pressure exactly when the peg needed buyers. The UST supply on 7 May 2022 was about 18.77 billion. Much of that money tried to leave at the same moment.

Anchor never came back. It is listed as dead on Terra Classic, and in September 2024 governance burned 729,976,293 USTC left in Anchor contracts through Proposal 12135. Holders of aUST at the pre-depeg snapshot did receive 10% of the new Terra 2.0 supply, as explained on our LUNC vs LUNA page.

The death spiral in numbers

On 7 May 2022, at around 21:44 UTC, about 150 million UST was pulled from the Curve 3pool, the main on-chain market where UST traded against other stablecoins, and large sales followed. UST dipped about 2% below its peg. That alone was survivable. What followed was not.

As UST holders redeemed, the market module minted new LUNA and handed it to sellers, who sold it straight away. More LUNA on the market meant a lower LUNA price. A lower LUNA price meant that each redeemed UST needed even more LUNA to cover one dollar. That loop is what people call a death spiral, and it fed on itself until LUNA was nearly worthless.

Here is a worked example of the arithmetic. If LUNA trades at $10, redeeming 1,000,000 UST mints about 100,000 LUNA. If LUNA has crashed to one cent, the same 1,000,000 UST mints about 100,000,000 LUNA. The protocol kept honouring redemptions all the way down, so supply rose almost 10,000-fold. The often-quoted "350 million LUNA" before the crash was the circulating figure. The on-chain total was about 725 million. Our LUNC supply page follows that 6.907 trillion peak through to the present.

Chain halts and the rescue that failed

Between 7 and 9 May the Luna Foundation Guard, a reserve set up to back UST, committed about $1.5 billion in bitcoin and UST to defend the peg. It did not hold: UST lost its peg a second time on 9 May. A reserve that size could not offset billions of dollars of redemptions while LUNA was falling.

On 12 May validators halted the chain at block 7,603,700. Production resumed shortly afterwards, but on 13 May the chain stopped again at block 7,607,789, announced by the official Terra account. Major exchanges including Binance and OKX suspended or delisted LUNA and UST. CoinGecko records LUNA's all-time low of $0.00000099997 on 12 May 2022. Halting the chain stopped the bleeding on-chain, but it could not undo the losses already taken by holders.

Terra 2.0 and the renaming

On 25 May 2022 governance passed Proposal 1623, the "Terra Ecosystem Revival Plan". It created a new chain from a fresh genesis and left the old chain running under a new name. Terra 2.0, chain ID phoenix-1, went live at around 06:00 UTC on 28 May 2022. Terra's own documentation says 27 May, a time-zone difference.

The new chain took the LUNA name. The old chain kept its chain ID, columbus-5, and became Terra Classic. Its LUNA was renamed LUNC (Luna Classic), and UST was renamed USTC (TerraClassicUSD). New LUNA was airdropped to holders of the old chain using two snapshots: block 7,544,910 on 7 May and block 7,790,000 on 27 May. No swap between the two coins was ever created. Binance later relisted the old coin as LUNC after the rename. What became of the broken stablecoin is covered on our USTC page.

Terra Classic history after the crash

Terra Classic did not die with the old LUNA. A volunteer community took over, re-enabled staking, voted in a burn tax and started a long series of upgrades. The courts, meanwhile, worked through the cases against Terraform Labs and its founder. The timeline below connects the two stories.

1. 5 Apr 2022LUNA all-time high$119.18 per coin on CoinGecko, about a month before the collapse.
2. 7–13 May 2022UST depeg and collapseTwo depegs, a failed reserve defence, two chain halts and mass delistings.
3. 28 May 2022Terra 2.0 launchesThe old chain becomes Terra Classic; LUNA becomes LUNC, UST becomes USTC.
4. 21 Sep 20221.2% burn tax goes liveCommunity-built code approved via Prop 4159. It is cut to 0.2% in October.
5. Dec 2022classic-terra GitHub createdCore development moves fully into community hands.
6. 21 Jan 2024Terraform Labs files Chapter 11In re Terraform Labs Pte. Ltd., No. 24-10070, Bankruptcy Court in Delaware.
7. Jun 2024SEC final judgmentAbout $4.47B against TFL and Do Kwon after an April 2024 jury verdict.
8. 30 Sep 2024TFL begins winding downA plan administrator takes over on 1 Oct 2024.
9. 31 Dec 2024Do Kwon extraditedMontenegro sends him to the United States.
10. 12 Aug 2025Guilty pleaTwo counts: conspiracy and wire fraud, in the Southern District of New York.
11. 11 Dec 202515-year sentenceJudge Paul A. Engelmayer; forfeiture of more than $19M.

For the chain itself, the story since then is about governance and code. The burn tax moved from 0.2% to 0.5% in May 2023 and to 1.5% via Proposal 12223 in August 2026, a rate governance can change again by vote. You can follow the details on our burn tax page and see the live total on the burn tracker. The people behind the revival are profiled on our LUNC community page.

Studied the history? Plan the next step

If you decide to hold some LUNC, most routes begin with USDT. Get it ready, then move it to an exchange that lists Terra Classic and check its withdrawal status first.

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Do Kwon and the legal aftermath

Do Kwon, co-founder of Terraform Labs (TFL), faced cases on several fronts. In the United States the Securities and Exchange Commission sued TFL and Kwon in the Southern District of New York. A jury found them liable in April 2024, and the court approved a final consent judgment in June 2024. The amounts add up to roughly $4.47 billion, which the SEC rounds to "more than $4.5 billion". That is a civil judgment, not a criminal fine.

The criminal case followed Kwon's extradition from Montenegro on 31 December 2024. On 12 August 2025 he pleaded guilty to two counts, conspiracy to commit securities, commodities and wire fraud, and wire fraud. Prosecutors had agreed to recommend no more than 12 years, and the defence asked for 5. On 11 December 2025 Judge Paul A. Engelmayer sentenced him to 15 years, above the prosecutors' request, with forfeiture of more than $19 million. Reports say he could later be transferred to South Korea after serving about half of the US term, where he faces separate charges.

Terraform Labs itself filed for Chapter 11 in January 2024 and has been winding down since 30 September 2024. Todd R. Snyder was appointed plan administrator on 1 October 2024. About 16,640 crypto-loss claims were filed, determinations are issued on a rolling basis, and no distribution date has been announced. The wind-down trust has also sued Jump Trading and related parties (18 December 2025, seeking at least $4 billion) and Jane Street entities (23 February 2026, alleging insider trading and market manipulation). The claims window closed in 2025, so buying LUNC now gives no right to compensation.

In South Korea, co-founder Daniel Shin (Shin Hyun-seong) and others were indicted in April 2023 at the Seoul Southern District Court. In 2025 the Korean Supreme Court held that LUNA and UST are not "financial investment products" under the Capital Markets Act and rejected the seizure of Shin's assets, while the fraud charges continue. We could not confirm a first-instance verdict for Shin, nor any Korean proceeding against Kwon in person, so treat any headline claiming a Korean verdict with caution.

Lessons from the collapse

The first lesson is about collateral. A stablecoin backed only by a coin from the same system is backed by confidence, and confidence can vanish in a weekend. The second is about yield. A high, steady return on a "stable" asset has to come from somewhere, and when the source is unclear, the risk usually sits with the depositor. The third is about concentration: when one app holds most of a coin's demand, a run on the app becomes a run on the coin.

For LUNC holders there are practical lessons too. The coin you hold is the survivor of that crash, not a recovery fund, and it carries no legal claim. Its supply remains in the trillions despite years of burns, which is why price targets need careful maths. If you want to judge the chain's future on its own merits, read our sober look at whether LUNC can recover.