GAM Holding to investigate false $3B Terra bailout report

A fake press release purportedly issued by asset manager GAM Holding made the rounds on Thursday, falsely claiming the firm was negotiating a $2 to $3 billion investment to resuscitate Do Kwon’s decimated DeFi venture Terraform Labs. The Switzerland-based firm released a statement on Friday denying all claims and announced a formal investigation.

The false report, titled GAM Holding Could Be Terra’s White Knight, was published by AccessWire at 11:00 pm London time. It said GAM was expected to invest a hefty sum into the ecosystem in order to regain Terraform Labs’ stablecoin TerraUSD (UST)’s peg to the US dollar.

A phony quote from GAM Holding chief exec Peter Sanderson was included, stating, “We firmly believe in Terra’s ecosystem.”

“When black swan events impact markets, opportunities blossom. We see opportunity in UST’s recent activity, and continue to see promise in Terra’s broader strategy.”

The wire further urged those seeking more information to reach out to GAM’s media liaison Charles Naylor, who likely had quite the influx of messages in the following hours. Media outlets like CryptoPotato and CoinGape picked up the false story — however, at press time, CoinGape has heavily edited the article to reflect the true nature of events (sans disclaimer).

The following day, GAM released its own certified statement: “There is no truth in the story and GAM did not issue a press release.”

“We are investigating the source of this story and how it came to be published.”

Read more: Terra’s death spiral is hitting all its crypto friends

Terra delisted as Yellen calls for more regulation

Algorithmic stablecoin UST collapsed this week, causing a multi-billion dollar selloff in crypto markets. Major exchanges like Binance and Upbit have delisted the project. Essentially, Terra is completely dead.

As an unprecedented ripple effect, largest stablecoin Tether lost its peg on Thursday, trading as low as $0.96.

• Tether is meant to be backed 1-1 by US dollars in the form of cash, treasury bills (effectively US government bonds), secured loans, and other investments.
• Commercial paper (corporate debt) makes up about half of the assets backing USDT — yet Tether remains remarkably shady about the origins and grading of these assets.
• In November, Protos revealed a staggering amount of Tether was issued to just a handful of market makers.

Tether has regained its $1 peg as of press time. However, the brief incident has sent major shockwaves through the ecosystem — even reaching institutional players like US Treasury Secretary Janet Yellen.

In a statement during the House Financial Services Committee, Yellen expressed concern over the knock-on effects a failed stablecoin like Terra can have on other USD-pegged digital currencies.

Yellen stated that in her opinion, a $2 trillion crypto market wasn’t big enough to create systemic risk — but that extra regulation could safeguard against future market-wide meltdowns.

“I wouldn’t characterize it at this scale as a real threat to financial stability, but they’re growing very rapidly, and they present the same kind of risks that we have known for centuries in connection with bank runs,” (our emphasis.)

“We really need a regulatory framework to guard against the risks,” Yellen said.

The US Treasury is working on a report to outline such a framework, which is likely to include mention of a central bank digital currency (CBDC) to temper future risks.

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