KEY POINTS

  • A lawsuit claims Terra tokens are unregistered securities
  • It alleges that six venture capital firms promised to support and fund the Terra ecosystem and to "defend the peg" 
  • LUNA was trading up 6.78% at $1.93

Terraform Labs CEO and co-founder Do Kwon may have moved on from the infamous Terra algorithmic stablecoin UST and native token LUNA's implosion but investors in the U.S. are just getting started. The South Korean entrepreneur alongside venture capital firms now faces a class-action suit in the U.S. for allegedly misleading investors.

Kwon's legal problems continue to build up as he headlines the list of defendants in the class-action lawsuit filed in the U.S. District Court in Northern California by Nick Patterson for allegedly violating the Federal Securities Law.

Other defendants named alongside Kwon in the lawsuit are Terraform Labs (TFL), Jump Crypto, Three Arrows Capital, Republic Capital, Tribe Capital, Definance Capital, GSR and Nicolas Platias. The plaintiff, Patterson, alleges that Terra tokens were sold as unregistered securities and that "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."

Terra Community AMA with Do Kwon (April 2021) 1-22 screenshot
Terra CEO, Do Kwon is hosted by long standing member of Terra Community @SebNondzee! Terra Official YouTube Account

The lawsuit also highlighted Kwon's behavior before the historic crash that wiped out tens of billions worth of investments, noting that "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'." Prior to Terra's UST and LUNA's collapse, Kwon made headlines when he shut down critics and in one particular event he slammed a British economist and said, "I don’t debate the poor on Twitter, and sorry I don’t have any change on me for her at the moment."

Aside from Kwon, the lawsuit alleged that the named venture capital firms "promised to support and fund the Terra ecosystem and to 'defend the peg'." It also noted that "(Terra) promotions, along with the announcement of financial backing of major venture capitalists in the sector, were a siren song to both veteran and rookie crypto investors alike, luring them in with a purportedly 'stable' digital asset in UST that would nevertheless provide outsized returns on investment via Anchor."

Kwon and the other named defendants have yet to release a statement about this class-action lawsuit. LUNA, the native token of the new Terra 2.0 blockchain, was trading up 6.78% at $1.93 with a 24-hour volume of $250,110,244 as of 9:37 p.m. ET on Sunday, based on data from CoinMarketCap.

MEET IBT NEWS FROM BELOW CHANNELS

© Copyright IBTimes 2022. All rights reserved.