Terraform Labs and Do Kwon are accused of, among other things, misleading Terra investors . They have been the subject of a new lawsuit in the United States.
A class action lawsuit filed in California on Sunday claims that Terraform Labs and a host of other entities, including the company’s CEO, Do Kwon, Jump Crypto and Jump Trading, DeFiance Capital and bankrupt hedge fund Three Arrows Capital, are responsible for manipulating retail investors into buying Terra ecosystem tokens at “inflated prices“, making or approving false or misleading statements, failure to register securities.
The filing requests that any person who purchased tokens from the Terra ecosystem, including, but not limited to, Terra blockchain native assets, LUNA and UST, between January 1 and December 31, 2009 and May 25, 2022 participate in the action.
Terra suffered a dramatic collapse in May when its algorithmic stablecoin, UST, lost its peg to the U.S. dollar, triggering a death spiral that wiped out about $40 billion of the crypto market in a few days. Several major crypto players, including Terra’s backers, Three Arrows Capital, were hit hard when LUNA crashed to zero and the market plummeted, causing a domino effect that spread throughout the industry.
Meanwhile, Kwon and Terraform Labs dealt with the fallout. Terra tried to relaunch with a forked blockchain that omitted its failed stablecoin algorithmic design, but it struggled to gain any notable momentum, and its new LUNA token is now trading more than 90% below its peak. Kwon has also faced several lawsuits from investors in South Korea and could be accused of running a Ponzi scheme.
The filing comes three weeks after prosecutors in South Korea and the U.S. met to share information about multiple ongoing investigations into the Terra collapse.
Although Kwon is charged in South Korea, he is believed to reside in Singapore.