Anchor’s advertised UST yield—around 20% APY—was not a fixed reward generated by “staking fees.” It combined income tied to borrower collateral and loans with incentives and a reserve that could cover shortfalls. That reserve depended on outside support when protocol revenue fell short, so the rate was a target, not a bank-like promise. The yield system also was separate from the mechanism intended to keep UST near $1.
What people called “staking interest”
Anchor launched in March 2021 as a lending and borrowing protocol. UST holders deposited their tokens into Anchor to earn a yield; borrowers posted collateral to borrow UST. In a 2023 opinion in the U.S. Securities and Exchange Commission’s case, the U.S. District Court for the Southern District of New York described Anchor as an investment pool whose depositors received a share of pool profits, and recounted marketing that advertised returns of 19% to 20%.
Calling this “staking UST” can obscure the arrangement. A depositor was not simply receiving a native, fixed staking reward for holding UST. Anchor’s launch material described several sources of support for the advertised rate, while a Federal Reserve Board working paper later found that the protocol’s costs outpaced its revenue. The available records do not establish a reliable percentage breakdown among the funding sources.
How Anchor said the yield would be funded
Anchor’s launch-era document, later filed as a trial exhibit in the SEC case, described an adjustable system rather than a guaranteed rate. Its stated design drew on rewards from staking derivatives used as borrower collateral, cash flows such as emissions and transaction fees from proof-of-stake chains, borrower incentives in ANC tokens, and a yield reserve. The document said excess yield would go into the reserve, which could help support the target when supply and demand diverged. It also said the rate could change as staking derivatives were added or governance proposals passed.
PC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11Crashes, No Sound, or Screen Glitches?
Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minute#1 Best Overall
- Effortlessly build your crypto portfolio via the all in one Ledger Wallet app: buy, sell, send, receive, swap, stake and more across popular blockchains. 15,000+ coins & tokens in a single dashboard. Keep a close eye on the market. Compare service providers. Track performance. Get timely alerts. Build your portfolio with confidence.
- Effortlessly build your crypto portfolio via the all in one Ledger Wallet app: buy, sell, send, receive, swap, stake and more across popular blockchains. 15,000+ coins & tokens in a single dashboard. Keep a close eye on the market. Compare service providers. Track performance. Get timely alerts. Build your portfolio with confidence.
- Enjoy Bluetooth connectivity, iOS access, and hours of battery use with this mobile-first, secure backup signer. Freedom you can depend on.
- Genuine Check: confirm your signer is authentic during setup with the Ledger Wallet app.
- Protect your signer: keep it in mint condition at all times with a bespoke Pod or Case to avoid scratches and everyday wear and tear.
| Funding or support source | Role in the stated design |
|---|---|
| Rewards from staking derivatives | Rewards associated with staking assets used as borrower collateral could contribute income for depositors. |
| Borrower fees and interest | Borrowers paid fees and interest, another potential source of protocol revenue. |
| ANC incentives | Token incentives were used to encourage borrowing and support activity around the target yield. |
| Yield reserve | A buffer intended to cover periods when available yield did not match the target. The launch material described the design; it did not establish that the reserve could sustain the rate indefinitely. |
| Outside grants | The Federal Reserve Board paper says the Luna Foundation Guard (LFG) subsidized Anchor’s losses with grants. |
These sources are not interchangeable. Collateral rewards and loan income were revenue; incentives helped attract activity; the reserve bridged gaps; and LFG grants supplied outside support. Describing the whole APY as “staking fees” leaves out key parts of the funding picture.
Why the advertised rate was vulnerable
In a 2023 staff working paper, Anton Badev and Cy Watsky of the Federal Reserve Board concluded that Anchor’s costs of providing 19.5% APY exceeded revenue from staking assets associated with bonded collateral, borrower fees, and interest. They said the shortfall rapidly depleted reserve assets and that LFG grants subsidized the losses. Their assessment was that Anchor never became profitable enough to be self-sustaining. The paper’s authors note that its analysis and conclusions are theirs and do not necessarily represent the views of other Board members.
Rank #2
- Proven security at scale: Over 9 years and millions of cards issued with no known remote hacks, while military‑grade EAL6+ security keeps your private keys locked inside the chip. Your cryptocurrencies stay strongly protected from online attackers.
- Tap once to manage your entire crypto wallet across 90 blockchains - no USB cables or Bluetooth, no batteries, no setup. Access 14,100+ coins & tokens, DeFi, NFTs, and staking instantly from your phone
- Smart backup: Use your second Tangem Wallet as your Backup keys with end‑to‑end encryption; no more papers, pictures. If one card is lost, the remaining can still restore full access, with an optional seed phrase available for advanced users.
- Engineered to last up to 25 years: Waterproof (IP69K), shockproof and tested for extreme temperatures from −25°C to 50°C. A durable cold wallet with long‑term protection and independently audited security.
- Trusted by 6 million users worldwide (4.9 App Store, 4.8 Google Play) - buy, sell, swap, stake, and spend cryptocurrency directly. The secure offline storage wallet designed for how people actually use crypto wallets
The practical implication is that a prominent APY figure did not itself show that recurring revenue could fund that yield. If depositors expected more yield than collateral rewards and borrowing income supplied, the gap had to be covered by the reserve or outside support. Those buffers could buy time, but they did not turn the target into a guaranteed rate.
The Singapore International Commercial Court later cited promotional material showing an APY of 19.48% on 5 January 2022. That is a date-specific screenshot figure, not evidence of a stable long-term average. In its 2025 judgment, the court treated the disputed statement about up to 20% APY as a representation about the future, not an actionable misrepresentation of present fact. It said the screenshot did not promise sustainable near-20% yield over the long term or rule out use of a yield reserve.
Rank #3
- Proven security at scale: Over 9 years and millions of cards issued with no known remote hacks, while military‑grade EAL6+ security keeps your private keys locked inside the chip. Your cryptocurrencies stay strongly protected from online attackers.
- Tap once to manage your entire crypto wallet across 90 blockchains - no USB cables or Bluetooth, no batteries, no setup. Access 14,100+ coins & tokens, DeFi, NFTs, and staking instantly from your phone
- Smart backup: Use your second Tangem Wallet as your Backup keys with end‑to‑end encryption; no more papers, pictures. If one card is lost, the remaining can still restore full access, with an optional seed phrase available for advanced users.
- Engineered to last up to 25 years: Waterproof (IP69K), shockproof and tested for extreme temperatures from −25°C to 50°C. A durable cold wallet with long‑term protection and independently audited security.
- Trusted by 6 million users worldwide - buy, sell, swap, stake, and spend cryptocurrency directly. The secure offline storage wallet designed for how people actually use crypto wallets
Anchor’s yield and UST’s dollar peg were different mechanisms
Anchor’s yield could make holding UST more attractive, but it did not itself maintain UST’s dollar peg. The Court of Appeal of Singapore described the intended peg mechanism as an arbitrage system involving UST and LUNA: the protocol allowed users to exchange one U.S. dollar’s worth of LUNA for one UST, and vice versa, with minting and burning incentives intended to help restore UST’s price through supply and demand. That describes the intended design, not a guarantee that the mechanism would hold under stress.
The two mechanisms were connected through demand for UST, but they had different jobs: Anchor offered a yield to depositors, while the LUNA-linked arbitrage system was intended to keep UST near $1. A high advertised yield could attract UST deposits without guaranteeing the peg or ensuring that Anchor’s income could cover its costs.
Rank #4
- EAL5+ CERTIFIED SECURE ELEMENT + FINGERPRINT PROTECTION — Your private keys stay encrypted offline on a certified EAL5+ chip, the same security tier used in EMV bank cards. Built by DCENT, securing crypto since 2018. Fingerprint authentication adds a second layer no PIN-only wallet can match.
- 10,000+ ASSETS NATIVE ON 100+ BLOCKCHAINS — Hold Bitcoin, Ethereum, XRP, Solana, Cardano, popular stablecoins (USDT, USDC), and NFTs in one wallet. No third-party apps, no fragmented setup — every supported asset works straight out of the box.
- TAP-TO-SIGN MOBILE EXPERIENCE — Pair your wallet with the DCENT mobile app over Bluetooth. Manage tokens, review transactions, and access in-app swap features directly from your phone — no cables, no desktop required.
- WEB3 & dAPP ACCESS VIA METAMASK — Connect to MetaMask and other browser extension wallets to manage NFTs, claim airdrops, and access dApps. A large screen and intuitive 4-button interface keep every transaction clearly visible before you sign.
- SEAMLESS FIRMWARE UPDATES & 30-DAY MONEY-BACK GUARANTEE — Apply security updates without resetting your wallet or migrating funds. Backed by Amazon's 30-day money-back guarantee — your purchase is risk-free.
The scale of Anchor’s role is reflected in the 2023 U.S. district court opinion: it said about 14 billion UST had been deposited in Anchor out of roughly 19 billion UST in circulation by May 2022. These are approximate figures from the court’s account of the SEC case record.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happened in May 2022
The Singapore trial judgment states that UST lost its one-to-one peg on 7 May 2022 and did not regain it. The SEC said that after the depeg, UST and Terraform’s other tokens fell close to zero and about $40 billion in market value was lost nearly overnight. The agency attributed that account to evidence presented at trial.
Best Value
- Dual-chip architecture for maximum protection: The next-gen, fully auditable TROPIC01 chip works alongside a certified EAL6+ Secure Element—completely NDA-free—to deliver radically transparent, industry-leading defense against physical attacks.
- Quantum-ready security: Get protection against future threats with the first-ever hardware wallet designed with quantum-ready architecture.
- See every detail with confidence: Our largest high-resolution color touchscreen makes it easy to navigate your assets, review transactions and manage your coins with clarity.
- Wireless freedom with encrypted Bluetooth control: Manage, buy, swap and stake securely using Trezor Suite on desktop or mobile. Qi2-compatible wireless charging keeps your Trezor powered up. No cables required—security meets convenience.
- Works seamlessly with Android, iOS and desktop: Connect wirelessly or via USB-C to your phone or computer. Manage your crypto anywhere with our companion Trezor Suite app.
The collapse illustrates why a yield promise and a peg mechanism should not be conflated. Anchor’s rate depended on its funding mix and support; UST’s dollar target depended on a separate arbitrage design involving LUNA. Neither advertised yield nor the intended peg mechanism meant depositors were protected from market or protocol failure.
What the later court decisions did—and did not—decide
The legal record spans different courts, claims, and procedural stages. It should not be reduced to a single ruling that Anchor’s advertised rate was either safe or fraudulent in every respect.
- 31 July 2023 — U.S. District Court for the Southern District of New York: An opinion summarized allegations and evidence in the SEC case, including Anchor’s launch and marketing, reserve infusions, UST adoption, and the May 2022 collapse. It was an opinion at that stage of the case.
- 13 June 2024 — SEC announcement following a U.S. jury verdict: The SEC said a unanimous jury found Terraform and Do Kwon liable and that they agreed to pay more than $4.5 billion. The release also said Terraform had filed for Chapter 11 bankruptcy in January 2024.
- 2025 — Singapore International Commercial Court: In representative proceedings, defendants conceded that the first four and sixth pleaded representations were fraudulent misrepresentations. The court found the disputed fifth statement about up to 20% APY concerned a future representation, rather than an actionable misrepresentation of present fact. It did not establish that the product was safe or that the yield was sustainable.
- 6 March 2026 — Court of Appeal of Singapore: The appellate decision addressed appeals concerning damages and other issues in those representative proceedings. It recorded the concessions and the trial court’s treatment of the disputed yield statement; its scope is specific to those proceedings and issues.
A useful way to assess advertised crypto yield
Anchor’s history suggests questions worth asking before treating a crypto APY as interest in the ordinary bank-account sense:
- What actually funds the yield: borrower interest, collateral rewards, token emissions, incentives, or an outside subsidy?
- Is there a reserve, who funds it, and is it large enough to bridge a sustained shortfall?
- Is the APY fixed by contract, adjustable through governance, or a target supported by changing revenue?
- What asset is deposited, and does its peg depend on an algorithmic mechanism or collateral backing?
- How dependent is the system on borrower demand and collateral values, and what happens to withdrawals or yield if revenue falls?
A separate Federal Reserve Board working paper examined DeFi spillovers around Terra’s collapse. It reported that the likelihood of a blockchain’s time-bound market-share loss rose approximately 40% for each additional bridge it shared with Terra at the time of collapse. That is a study finding about blockchain market-share spillovers, not a measure of investor losses or an explanation of Anchor’s yield funding.
Recommended Free Tools
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
