Terraform Labs and its CEO Do Kwon have been hit with another class-action lawsuit, this time in the United States. The complaint seeks to represent investors that invested in Terra between May 2021 and May 2022.
Key Takeaways
- Over the weekend, a class action lawsuit was filed against Terraform Labs, Do Kwon, and other crypto entities.
- The suit levels multiple charges, including racketeering, against the defendants.
- Do Kwon also faces multiple lawsuits in South Korea in the fallout from Terra's implosion.
Terraform Labs, and Do Kwon are accused, among other things, of misleading Terra investors and racketeering.
Terra Lawsuit Represents U.S. Retail Investors
Terraform Labs and Do Kwon have been slapped with a new lawsuit in the United States.
The class-action suit filed in California late Sunday claims that Terraform Labs and a host of other entities, including the company’s controversial CEO Do Kwon, Jump Crypto and Jump Trading, DeFiance Capital, and the bankrupt hedge fund Three Arrows Capital, are responsible for leading retail investors into purchasing Terra ecosystem tokens at “inflated prices,” making or endorsing false or misleading statements, aiding and abetting, civil conspiracy, failing to register securities, and racketeering.
The filing calls for anyone who purchased Terra ecosystem tokens, including but not limited to the Terra blockchain’s native assets, LUNA/USD and UST, between May 20, 2021, and May 25, 2022, to participate in the action.
Terra suffered a dramatic collapse in May when its algorithmic stablecoin, UST, lost its peg to the U.S. dollar, triggering a death spiral that wiped out around $40 billion from the crypto market in a matter of days. Several major crypto players, including Terra backers Three Arrows Capital, were hit hard as LUNA crashed to zero and the market plummeted, resulting in a domino effect that spilled across the industry.
Meanwhile, Kwon and Terraform Labs have been dealing with the fallout. Terra attempted to revive itself with a forked blockchain that omitted its failed algorithmic stablecoin design. Still, it struggled to gain notable momentum, and its new LUNA token now trades over 90% down from its high. Kwon also faces multiple lawsuits from investors in South Korea and could be charged with running a Ponzi scheme. The South Korean Parliament is also investigating the matter.
The complaint filing comes three weeks after prosecutors from South Korea and the U.S. met to share information about the multiple ongoing investigations into Terra’s collapse.
While Kwon faces charges in South Korea, he’s believed to reside in Singapore. Terraform Labs’ sole headquarters is also in Singapore after it shut down its South Korean subsidiary in May.