In a lawsuit filled with promises from Do Kwon, the Luna Foundation Guard, and other Terra-related entities, an Illinois-based plaintiff has alleged that all parties involved misled investors about whether all Terra tokens (including UST and LUNA) are actually securities, among other allegations.
- The lawsuit, filed on Friday in US District Court in Northern California by Nick Patterson, alleges several VS firms, Terraform Labs, and founder Do Kwon of violating federal securities laws with the sale and promotion of UST and LUNA.
- More precisely, the plaintiff said the two tokens that imploded last month resembled securities and were promoted via misleading information.
“On top of selling unregistered securities with the Terra Tokens, Defendants made a series of false and misleading statements regarding the largest Terra ecosystem digital assets by market cap, UST and LUNA, in order to induce investors into purchasing these digital assets at inflated rates.”
- The lawsuit also alleged that “a group [of] six venture capital groups that promised to support and fund the Terra ecosystem and to “defend the peg” in the event that high volatility caused the UST/LUNA pair to become untethered from one another” failed on their promise. Those were LFG, Jump Crypto, Tribe Capital, Republic Capital, GSR, DeFinance Capital, and the struggling 3AC.
- The lawsuit also focused on Do Kwon and his rather controversial behavior prior to the collapse of the tokens. “One of Kwon’s go-to insults is to demean and delegitimize his detractors or critics of the Terra Tokens by dismissing them as “poor.””
- As previously reported, Kwon was repeatedly mocking people who had criticized the algorithmic nature of UST, with one particular event popping out against a British economist – “I don’t debate the poor on Twitter, and sorry I don’t have any change on me for her at the moment.”
- The implosion of the Terra tokens caused a market-wide panic that led to a crash among all cryptocurrencies. Within the following months, global authorities have outlined plans to regulate the crypto and stablecoin industry, and there’re already several lawsuits filed against entities somehow related to the events.
- More recent reports suggested that the attack against the UST peg was an inside job.