Do Kwon, the founder of Terraform Labs, is now the target of a lawsuit filed by more than 350 aggrieved investors, who lost nearly $57 million in the UST unlocking case.
The class action alleges that Kwon and his subordinates intentionally made false statements about the price stability of his stable currency UST. The investors “believed that Terra USD would be a stable token by design and would always be priced to the U.S. dollar“, the complaint states.
In addition, they believe that Do Kwon intentionally built Anchor Protocol, a high-interest Defi Protocol to entice customers to buy more USTs. Anchor Protocol was essentially a lending and borrowing platform that started with a 20% interest rate – an industry first.
However, in May 2022, the stablecoin mechanism failed and went into a death spiral, losing virtually all of its market value within minutes. The lawsuit claims that despite UST’s failure, Do Kwon continued to keep hope alive by tweeting for people to calm down and saying that “everything was under control“.
A spokesperson for Terraform Labs, which is also a defendant in the lawsuit, said in a statement that the company had committed no wrongdoing and would defend itself until proven otherwise.
Multiple charges against Kwon
The once famous Terraform founder is now facing numerous lawsuits and threats since the collapse of UST. In September, it was reported that South Korean authorities had issued an arrest warrant for him, and even Interpol added him to its red list, asking law enforcement to locate and detain him if possible.
Do Kwon, meanwhile, has been very active on social media and once tweeted “make no effort to hide” to make it known. He also gave the impression that he was working on the new Terra blockchain, called Luna 2.0, and that exciting new developments were coming. He also made appearances on a few select talk shows and podcasts where he vehemently denied engaging in any sort of fraudulent activity or wrongdoing.
On October 6, the South Korean Ministry of Foreign Affairs ordered Terra’s founder (Kwon is a Korean national) to surrender his passport or risk having it revoked. His whereabouts are currently unknown and he is reportedly fleeing and not complying with the authorities.