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Do Kwon and others involved in the TerraUSD project are facing a $57 million class action suit from aggrieved investors.
Do Kwon and associates are facing yet another court case that could come with massive 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.
Additionally, investors believed that the stablecoin would offer “attractive APY returns” when staked in Anchor Protocol—Terraform Labs’ lending and borrowing service.
However, TerraUSD stablecoin’s price mechanism failed in May, causing the asset to lose its peg with the U.S dollar and lose virtually all of its market value.
The lawsuit alleges that, despite promises, TerraUSD was not “stable by design,” was unable to maintain its price peg, and was unable to recover from losses.
It also alleges that token holders did not have the ability to trade TerraUSD for the equivalent amount of Luna after the project’s swap mechanism was disabled in May.
Finally, it alleges that Anchor was not “principal guaranteed” and did not provide a sustainable 20% yield as promised.
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.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other digital assets.
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