Do Kwon and other members of Terraform Labs face a class action lawsuit from over 350 investors
A class action lawsuit for $57 million has been filed against Do Kwon and other TerraUSD project participants by irate investors.
Terra’s Do Kwon Facing Yet Another Lawsuit
Another court case involving Kwon and their accomplices could result in severe civil penalties. According to the Wall Street Journal, Kwon faces a class action suit on behalf of investors who lost $57 million during the collapse of TerraUSD stablecoin. Those investors are now seeking their lost funds as well as aggravated damages.
The class action suit alleges that Kwon and others fraudulently misrepresented TerraUSD’s price stability. Investors “believed that [TerraUSD] would be a token that was stable by design [and] whose price would always be pegged to the US Dollar,” the text of the lawsuit reads.
Investors also thought the stablecoin would provide “excellent APY returns” when staked in Terraform Labs’ lending and borrowing platform, Anchor Protocol. However, the TerraUSD stablecoin’s price mechanism broke down in May, leading the asset to lose its peg to the US dollar and almost all of its market value.
According to the lawsuit, despite assertions to the contrary, TerraUSD was not “stable by design,” was unable to keep its price peg, and was unable to make up for losses. It further claims that after the project’s swap mechanism was stopped in May, token holders could not exchange TerraUSD for an equivalent number of Luna.
Finally, it alleges that Anchor was not “principal guaranteed” and did not provide a sustainable 20% yield as promised.
Lawsuit Is One of Many
The lawsuit was filed in September but went mostly unnoticed until coverage from the Wall Street Journal today.
In a statement to the newspaper, a Terraform Labs representative denied any wrongdoing. She dismissed TerraUSD’s collapse by stating that there is a “fundamental difference between a public market event and fraud” and added that Terra’s risks were publicly known.
The lawsuit is being handled by Drew & Napier, one of Singapore’s “Big Four” law firms. It concerns over 350 investors from Spain, Australia, Singapore, and elsewhere.
It names Terraform Labs CEO Do Kwon plus company members Daniel Hyunsung Shin and Nikolaos Alexandros Platias as defendants. Terraform Labs and the Luna Foundation Guard are also named as defendants.
Today’s newly-publicized lawsuit is not the only case against the project and its members. Kwon and others additionally face other class action suits from firms such as Bragar Eagel and Squire, Scott+Scott, and Grant & Eisenhofer.
Kwon also faces criminal charges in South Korea. In September, Interpol issued a red notice against Kwon in an attempt to restrict Kwon’s movement internationally. His whereabouts are still unknown.
Read more:
- As LUNC Loses More Than $100 Million In A Single Week, Terra Classic Loses Its Allure In A Bear Market
- Terra’s Do Kwon Denies That South Korean Authorities Have Frozen His Crypto Assets