GAM refutes claims it has entered negotiations to prop up Luna stablecoin

Swiss asset manager GAM has denied claims it has entered negotiations with Terraform Labs in order to support the Luna stablecoin.

A press release purporting to come from the fund house was issued at 2300 BST yesterday (12 May), alleging the manager had entered negotiations to invest between $2-3bn in order to burn excess supply of the UST stablecoin, as it is dumped in what some have said resembles a bank run.

The release added that GAM intended to help Terra re-establish the UST peg back to $1, which it broke from on Monday (9 May).

It included a false statement from the firm's CEO, in which it was claimed Peter Sanderson and GAM had an interest in "supporting a vibrant, innovative, and resilient crypto market" and that it "firmly believes in Terra's ecosystem".

GAM has since issued its own press release stating there is "no truth in the story and GAM did not issue a press release".

It added it was investigating the source of the story and how it came to be published.

Market Movers Blog: Yellen warns of wider market risk following stablecoin drama

UST broke from its peg against the US dollar, which it is designed to track, and is currently trading around $0.16.

Analysts have questions whether this represents the ‘Lehman Brothers moment' for the cryptocurrency industry.

Contagion effects have already begun to show, with bitcoin falling over 20% since Monday, although it has since recovered to a 10% drop from the start of the week.

A second stablecoin has since snapped its peg, as Tether fell as low as $0.95 overnight.

US Treasury Janet Yellen has warned of wider market risk following the stablecoin dramas, adding they "present the same kind of risks that we have known for centuries in connections with bank runs".