Terraform Labs CEO and co-founder Do Kwon faces yet another legal battle—this time in a Singapore court, which is set to hear a class-action lawsuit filed on behalf of more than 350 international investors. They claim to have lost about $57 million in the collapse of the algorithmic stablecoin TerraUSD (UST) and its ecosystem, according to a Wall Street Journal report.
The legal claim states that the UST stablecoin, being pegged 1:1 to the U.S. Dollar, was designed to act as a store of value and as such was supposed “to be protected from the volatility of the cryptocurrency markets.”
The Terra ecosystem imploded in May this year, with more than $40 billion of investors’ wealth wiped out in a matter of weeks.
Terra's collapse accompanied a massive crypto selloff, sending the prices of and other top cryptocurrencies tumbling. The crash led to the bankruptcies of high-profile crypto lenders Celsius and Voyager, as well as hedge fund Three Arrows Capital, and prompted increased scrutiny towards crypto investing and from regulators across the world.
It is alleged that Kwon, despite being aware of the “structural weakness” of the UST stablecoin, made “fraudulent misrepresentations,” inducing investors into purchasing the asset.
The lawsuit is led by Julian Moreno Beltran, a citizen of Spain who claims to have lost about $1.1 million worth of TerraUSD, and a Singapore native Douglas Gan Yi Dong.
Many other claimants, who say they are “entitled to claim for the loss and damage suffered in purchasing the UST tokens,” as well as unspecified “aggravated damages,” invested tens or hundreds of thousands of dollars in TerraUSD, according to court documents.
Other defendants in the lawsuit are the Singapore-incorporated Terraform Labs PTE Ltd, the company’s former head of research Nicholas Platias, and the Luna Foundation Guard (LFG), a fund established to support the growth of the Terra ecosystem.
The lawsuit was filed on September 23, with the hearing scheduled for Wednesday, November 2.
A spokesperson for Terraform Labs, however, rejected the allegations, adding that the firm will defend itself against the claims laid out in the lawsuit.
"There is a fundamental difference between a public market event and fraud," the spokesperson said in a statement cited by the WSJ. "The risks were publicly known and discussed, and the underlying code was open-sourced."
Kwon is also wanted by South Korean authorities, who issued an arrest warrant for the Terraform Labs’ boss in September, charging him with violating the country’s capital markets act. Interpol also approved South Korean prosecutor’s request to issue a red notice for Kwon.
Earlier this month, the South Korean Ministry of Foreign Affairs canceled Kwon’s passport.
The Terraform Labs chief was also slapped with a class-action lawsuit in the U.S. in June, while the U.S Securities and Exchange Commission is reportedly investigating whether the company violated federal investor protection rules with the way it marketed UST.
Despite facing numerous investigations into the collapse of Terra, Kwon, whose whereabouts are unknown, has denied allegations that the project was a “fraud.” He also claimed that he had personally lost nearly all his net worth in Terra’s crash.