CoinShares, one of Europe’s largest digital asset firms with billions in assets under management, revealed that its DeFi exposure to Terra’s UST stablecoin resulted in a loss of more than $21 million, the company’s CEO Jean-Marie Mognetti said on Tuesday.
Mognetti disclosed the loss in an investor message published in the company’s 2021 Financial Annual Report.
Although the loss will be reflected in CoinShares’ Q2 earnings, Mognetti said he will provide a fuller update either with the Q2 report or during the earnings call scheduled for August.
CoinShares had no direct exposure to UST
Mognetti explained that while CoinShares was not directly exposed to LUNA’s price collapse through its trading activities, the firm does operate in decentralized finance (DeFi). When the UST/LUNA implosion occurred, CoinShares had exposure to UST through a specific trading book it was running.
“Following the events of the last few weeks, we have booked an exceptional loss from our DeFi activities of £17m on liquidating our holding in UST,” he said.
That figure is approximately $21.4 million. Despite the loss, the CEO emphasized that it should not affect the company’s core operations going forward.
“While this obviously impacts on the Group’s performance for Q2, this loss has not had any impact on any of our additional Capital Markets activities, nor does it in any way impact upon the hedging and collateralisation of any of the Group’s ETPs,” Mognetti added.
A learning experience and a ‘battle scar’
CoinShares described the episode — LUNA’s collapse and the resulting loss — as a humbling experience and a “battle scar” from which the team has learned. The company said the events have reinforced its focus on delivering “the premier investment technology for the digital asset sector.”
Mognetti also noted that CoinShares had an exceptional 2021: fiscal year income rose more than 500% year-on-year to over £113 million (approximately $142.4 million). However, he cautioned that shareholders may not fully realize that value in the short term due to the challenging global macroeconomic environment and limited liquidity in the company’s stock.
Following Terra’s collapse, the ecosystem underwent a split: a new forked chain known as LUNA 2.0 was created while the original chain is now called Luna Classic (LUNC).