Terraform Labs CEO accused of false statements about UST stability

The plaintiffs demand compensation from Do Kwon in the amount of the purchase value of the assets

20.06.2022 - 11:55

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2 min

What’s new? A class action lawsuit has been filed against the head of Terraform Labs (TFL) Do Kwon in the US District Court in Northern California. He is accused of selling unregistered securities, as well as false statements about the stability of the algorithmic stablecoin TerraUSD (UST) and its backing token LUNA. The plaintiffs are seeking full recovery of investment losses from Kwon.

The lawsuit against Do Kwon

Details of the case. The lawsuit alleges that members of Luna Foundation Guard (LFG), a non-profit organization, misled investors by claiming that the fund’s reserve would be sufficient to protect assets. On May 8, stablecoin lost its peg to the US dollar, with UST and LUNA prices plummeting to almost zero in the days that followed. Developers and the community decided to create a new blockchain, Terra 2.0, with new LUNA tokens distributed to holders of old assets at launch on May 28.

The list of those who filed the lawsuit includes cryptocurrency hedge fund Three Arrows Capital (3AC), as well as Jump Crypto, Jump Trading, Republic Capital, Republic Maximal, Tribe Capital, DeFinance Capital, DeFinance Technologies, and GSR Markets.

The plaintiffs also claim that TFL did not register digital assets with the US Securities and Exchange Commission (SEC) in any way. Do Kwon and his company are being asked for compensation in the amount of the purchase value of the tokens and all legal costs.

Earlier, Terra’s 2 000 retail investors filed a class action lawsuit against the US arm of cryptocurrency exchange Binance. The platform was accused of using misleading advertising and selling UST as unregistered securities. The suit also alleges that Biannce.US was not registered as a broker-dealer or an exchange, which may be a violation of the Securities Act.

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