Lawsuit Filed Against Terraform Labs & Founder Alleging The Parties Of Misleading Investors

A lawsuit filed by an Illinois-based plaintiff alleges parties related to Terra including Do Kwon and the Luna Foundation Guard misleading investors that all Terra tokens (including UST and LUNA) are securities

The lawsuit was filed in US District Court in Northern California by Nick Patterson on Friday and claimed that several VS firms, Terraform Labs, and founder Do Kwon have violated federal securities laws by selling and promoting UST and LUNA.

The plaintiff believes that the two tokens that crashed last month were promoted through misleading information and had a resemblance to securities.

Defendants also gave misleading statements regarding UST and LUNA, the largest ecosystem digital assets by market cap, for luring investors into buying these crypto-assets at inflated rates besides selling unregistered securities with the Terra Tokens.

Further, the lawsuit points out that a group of six venture capital groups failed to keep their promise of backing and funding the Terra ecosystem and to “defend the peg” in the event of de-pegging the UST/LUNA pair caused by the high volatility. 3AC, DeFinance Capital, Republic Capital, LFG, Jump Crypto, Tribe Capital, and GSR are those VCs.

The lawsuit also mentions the controversial behavior of the Terra founder Do Kwon before the Terra collapse.

Kwon in many instances was seen mocking people who criticized the fact that UST is an algorithmic stablecoin. In one instance he called a critic poor saying that he doesn’t debate with the poor and that he has no change for her at the moment.

The dramatic meltdown of the Terra tokens led to a wider crypto crash causing panic among investors. Bitcoin, the world’s leading cryptocurrency, reached a historical low. However, as of Sunday, it rebounded to the mark of $20,000. The top altcoin, Ethereum too, dropped below $1,000 over the weekend. Ethereum too surged to reach $1,138.39, as of this writing.

Meanwhile, government officials around the world have tightened their belts and are planning to regulate the crypto and stablecoin industry.

This is not the only lawsuit but several others were filed against the parties involving Terra. The latest reports show that the attack against the UST peg was internally planned.

ALSO READ: Celsius Warns Stabilizing Liquidity ‘Will Take Time’