In a Twitter update on Friday, the Luna Foundation Guard (LFG), an organization that supports the Terra ecosystem, revealed that their efforts to compensate Terra holders remain futile due to ongoing litigation.

Terraform Labs, its founder Do Kwon, and several venture capital firms that make up Luna Foundation Guard (LFG) are facing a long list of lawsuits for violating federal securities laws and misleading investors.

On Friday, the Luna Foundation stated that it would not be able to make distributions of funds to Terra owners while legal matters are pending.

“Our objective is to distribute the remaining assets of LFG to those affected by the depeg, the smallest holders first. Unfortunately, due to ongoing litigation and threats, distribution is not possible at this time. Although these matters are pending, a timetable for their resolution cannot be established”, LFG tweeted.

Friday’s statement comes after reports surfaced that authorities in South Korea had frozen nearly $40 million in crypto funds linked to LFG.

According to reports from the Luna foundation, their fund reserves currently total around $100 million, which is a drop in the ocean from the estimated $60 billion value wiped out by the collapse of the Terra ecosystem. The organization explained that it had used some of its reserve funds to help defend the peg of UST and the broader Terra economy after the stablecoin crashed in May 2022.

This tweet is the first update on the situation since the May announcement to compensate users. The latest report shows that the Luna Foundation still intends to use all of its remaining funds to compensate users of the UST stablecoin, but has not yet done so, citing litigation issues.

The tweet found wild reactions from members of the crypto community. FatManTerra crypto researcher beaten Luna Foundation’s defense of why it cannot pay affected TerraUSD (UST) investors. While FatManTerra claimed that the Foundation was just making excuses, another Twitter user, SonicTheBer said this is just another level of exit scam.

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