Key points to remember
- A class action lawsuit was filed against Terraform Labs, Do Kwon, and a host of other crypto entities over the weekend.
- The prosecution brings several charges, including racketeering, against the defendants.
- Do Kwon also faces multiple lawsuits in South Korea following the Terra implosion.
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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 hit with a new lawsuit in the United States.
The class action filed in California on Sunday evening claims that Terraform Labs and a host of other entities, including controversial company CEO Do Kwon, Jump Crypto and Jump Trading, DeFiance Capital and bankrupt hedge fund Three Arrows Capital, are responsible for the direction retail investors to purchase Terra ecosystem tokens at “inflated prices”, make or endorse false or misleading statements, aid and abet, civil conspiracy, fail to register securities and racketeering.
The filing calls on anyone who has purchased tokens from the Terra ecosystem, including but not limited to native Terra, LUNA and UST blockchain assets, among May 20, 2021 and May 25, 2022 to get in on the action.
Terra suffered a dramatic meltdown in May when its algorithmic stablecoin, UST, lost its peg to the US dollar, triggering a death spiral that wiped out an estimated $40 billion from the crypto market within days. Several major crypto players, including Terra backers Three Arrows Capital, were hit hard when LUNA crashed to zero and the market fell, resulting in a domino effect that unfolded. widespread in the industry.
Meanwhile, Kwon and Terraform Labs dealt with the fallout. Terra tried to revive itself with a forked blockchain that omitted its failed algorithmic stablecoin design, but it struggled to gain noticeable momentum, and its new LUNA token is now trading at over 90% against its Mountain peak. Kwon too faces several trials investors in South Korea and could be charged with running a Ponzi scheme. The South Korean Parliament is also investigating the question.
The filing of a complaint come three weeks after prosecutors from South Korea and the United States met to share information about the multiple ongoing investigations into the Terra collapse.
While Kwon faces charges in South Korea, he is believed to reside in Singapore. Terraform Labs’ sole headquarters is also located in Singapore after its South Korean subsidiary closed in May.
Disclosure: At the time of writing this article, the author of this article owned ETH and several other cryptocurrencies.