Wintermute chat logs add twist in Aurora spat over $11m in defunct stablecoin

Wintermute CEO Evgeny Gaevoy made waves last month with an explosive X post straight out of the movie Mean Girls: “We are not really friends with Near Foundation and Aurora Labs going forward.”

The CEO and co-founder continued with a lengthy thread that accused Aurora and the Near Foundation of reneging on Wintermute’s request to redeem some $11 million in crypto.

Aurora fired back days later, saying it rejected Wintermute’s request because the trading firm was exploiting its redemption programme for profit, which it claims is inconsistent with the terms on which the programme was made available.

“It is a significant loss in monetary terms which we consider to be the result of Near and Aurora’s actions,” Wintermute COO Marina Gurevich told DL News.

Now, DL News can reveal chat logs that raise questions about Aurora’s role in the deal, where Wintermute tried in vain to recover millions in the Near ecosystem’s defunct USN stablecoin for USDT.

The logs also provide details about the two parties’ deteriorating relationship over the months of August and September when the sides planned and discussed Wintermute’s request to redeem USN.

Aurora CEO Alex Shevchenko declined to respond to DL News’ multiple requests for comment.

DL News did not receive an immediate response from Aurora’s legal team.

Liquidating USN

USN is an algorithmic stablecoin similar to Terra’s infamous TerraUSD. In October last year, USN broke its peg to the dollar, prompting Near to wind down the stablecoin.

As a part of the decision to retire USN, Aurora created a fund to allow USN holders to redeem their tokens one-to-one for another stablecoin, Tether’s USDT.

Around the time Aurora created the USN redemption programme, Alameda Research, the now-collapsed arm of FTX and also a large USN holder, declared bankruptcy.

Alameda’s USN suddenly became part of the FTX estate, which the company’s new CEO, John J. Ray III, was tasked with liquidating to pay back Alameda and FTX creditors.

Contradicting chat logs

FTX approached Wintermute to help liquidate assets on its books, including USN.

But before committing to buying the USN from FTX, Wintermute went to Aurora to pass know-your-customer checks — a prerequisite for using the USN redemption programme — and to confirm it could redeem such a large amount of USN.

Chat records viewed by DL News show that on August 1, an Aurora employee guided Wintermute through the required KYC process. The employee told Wintermute it could redeem any amount of USN, but that larger amounts would require a two- to three-day waiting period.

“It doesn’t matter the amount, we just need to top up the relevant balance,” the Aurora employee said.

In a later conversation on August 3, an Aurora employee confirmed that Wintermute’s head of trading was suitable to conduct the KYC process on behalf of the firm.

The same employee also told Wintermute that it did not need to explain the source of its USN to access the redemption programme.

Based on these conversations, Wintermute said, the firm committed to purchase USN from the FTX estate on August 15.

A day later, Wintermute successfully conducted a test transaction, redeeming 10 USN for USDT.

“Just confirmed,” said an Aurora employee in response to Wintermute’s test transaction. “You can submit the full amount, it will take a couple of days from the Near Foundation to top up the balance and settle the swap.”

‘Only in respect of you’

But almost a month after Wintermute sent the rest of its USN to Aurora, it had still not received USDT in return.

On September 12, Wintermute asked Aurora for an update on the redemption.

In response, Aurora directed Wintermute to the Near Foundation, which it claims has ultimate authority over USN redemptions.

“Right now it’s fully between you and the Near Foundation,” an Aurora employee said.

The same employee added that the Near Foundation had previously handled $5 million and $7 million redemptions with “no issues.”

“I believe it’s only in respect of you, and I have no idea why,” the employee said.

Aurora’s public statements accusing Wintermute of trying to exploit its redemption programme for profit contradict the comments in these chat logs, where Aurora employees assured Wintermute it could make large redemptions.

It appears Aurora and the Near Foundation at some point changed their mind about Wintermute’s USN redemption.

But it’s unclear why Aurora didn’t bring up the issues it now says it has with Wintermute’s redemption earlier, before the trading firm committed to buy $11.2 million USN from the FTX estate.

DL News reached out to multiple members of the Near Foundation Council, the group that controls and makes significant decisions for the organisation, but did not receive responses.

At no point has Aurora or the Near Foundation publicly acknowledged that Aurora employees previously told Wintermute it could redeem USN through the programme.

Anti-money laundering issues

According to Wintermute, it wasn’t until two months after submitting its redemption requests that Aurora provided reasons for not honouring the deal.

In addition to asserting that Wintermute had broken the terms and conditions of its USN redemption programme in its public blog post, Aurora also told Wintermute privately that it believed there were anti-money laundering and counter-terrorist financing issues with the USN.

On-chain records reviewed by DL News show no evidence that Alameda’s USN was involved in shady activity.

Alameda minted the USN over three separate transactions in May last year. The firm used its USN to provide liquidity between USN and USDT on Ref Finance, the biggest decentralised exchange built on Near.

Then, in April this year, the FTX estate withdrew Alameda’s USN from Ref Finance before selling it to Wintermute.

Additionally, Aurora told Wintermute it “reserves the sole right to limit platform availability to any person,” in response to a complaint the trading firm lodged with Aurora and shared with DL News. Wintermute argues such a clause doesn’t give Aurora the right to make unjustified decisions over who can access the redemption programme.

“The reasons [Aurora] provided were not sufficient or reasonable and contradicted the successful test redemption,” Gurevich told DL News.

After rejecting the redemption request, Aurora offered to return Wintermute’s USN. But with the token discontinued and unusable, the gesture meant little to Wintermute executives, who rejected the offer.

To try and resolve the situation, Gurevich said Wintermute was happy to forgo the approximately $110,000 it stood to make from the USN redemption.

But Gaevoy also said Wintermute will “pursue all legal avenues” against Aurora and the Near Foundation if they didn’t respect the redemption.

With both sides now handing the matter off to their legal teams, it looks doubtful the situation will be resolved any time soon.

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Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.