Terraform Labs founder Do Kwon, along with the Luna Foundation Guard (LFG) and Terra founding member Nicholas Platias, are facing a fresh $57 million class action suit from aggrieved investors in Singapore.
The lawsuit is filed by 359 Terra investors in Singapore’s high court on September 23 and claims that Kwon, Platias, and the LFG made fraudulent claims regarding the ecosystem’s so-called algorithmic stablecoin, TerraUSD (UST), which was not “stable by design” and unable to maintain its U.S. dollar peg.
Investors “believed that [TerraUSD] would be a token that was stable by design [and] whose price would always be pegged to the US Dollar,” according to a report by the Wall Street Journal.
Additionally, investors assumed that the stablecoin would offer “attractive APY returns” when staked in Anchor Protocol, Terraform Labs’ lending and borrowing service, according to the text of the lawsuit.
According to the individuals filing the lawsuit, the four parties tied to Terra “knew or ought to have known that the Claimants wished to buy and hold cryptocurrency stablecoins that were not subject to the volatility of the wider market and earn a decent passive return.”
The claimants have asked for roughly $57 million compensation of their lost funds based on the value of UST tokens they purchased and held or sold amid the market downturn in May, as well as aggravated damages.
As reported, in May 2022, Terra UST failed amid a surge in withdrawals and went into a death spiral, losing virtually all of its market value in minutes. Subsequently, many claimed that the stablecoin was a Ponzi scheme and it was destined to eventually fail.
The lawsuit claims that, despite the failure of UST, Do Kwon kept on raising hopes by tweeting for people to calm down and saying “everything was under control.”
Kwon Hit with Lawsuits
Following the unprecedented failure of TerraUST, Kwon became the target of numerous legal actions and threats. In mid-September, South Korean prosecutors issued an arrest warrant for Do Kwon, and Interpol added Kwon to its Red Notice list, requesting law enforcement locate and potentially detain him.
Local media outlets at the time said that prosecutors were “in the process of freezing” tokens “believed to be owned by Kwon.” These coins were reportedly held on an unnamed “overseas” crypto exchange that was “cooperating” with the Seoul Southern District Prosecutors’ Office.
However, Kwon has been active on social media during the controversy and has denied claims that some $67 million of his crypto has been seized by prosecutors.