Do Kwon and other legal entities hit with a new class-action lawsuit for allegedly falsely promoting Terra's tokens
Terraform Labs CEO Do Kwon is facing a new class action lawsuit related to the collapse of the Terra ecosystem earlier this year.
Kwon is said to have promoted LUNA, UST, and a lending platform based on Terra Anchor despite knowing the projects would not be sustainable.
Florida resident Michael Albright filed a complaint with the United States District Court for the Southern District of New York on behalf of all others who purchased LUNA and UST and suffered financial losses.
Other crypto companies are also being targeted by the lawsuit, including Blockchain firm Terraform Labs, the company's former head of research Nicholas Platias, and more.
“The defendants falsely promoted UST, Luna and other related Terra coins through social media and other mail and web-based channels. In particular, the defendants advertised the stability of the coins and the guarantee of 20% annual return on the coins deposited in the Terraform Labs high-yield savings application on the Terra blockchain — Protocol Anchor (“Anchor”). ”
Plaintiff also said that Terra tokens acted like a Ponzi scheme, causing LUNA to eventually collapse as demand for the UST algorithmic co-stable decreased.
“The UST is the equivalent of a Ponzi scheme that is only sustained by the demand for UST created by Anchor's excessively high yields. As long as the demand for UST remains high, Terra's UST/Luna exchange mechanism will keep the supply of Luna relatively low and maintain a Luna price that can support the UST price.
But as soon as the demand for UST decreases and users start exchanging UST for Luna in large quantities, Luna could enter a vicious cycle of hyperinflation causing its own price and UST to fall with it.” .
Albright said that the crash, which ultimately caused what is believed to be the largest crash in crypto history, has caused significant morale loss for those who purchased LUNA.
“The loss of individual investors is huge. The New York Times reports that Redditors have shared suicide hotline numbers due to the extent of the damage some users have done. The reverberation was felt throughout the entire crypto universe, with around $300 billion in value set to disappear in the weeks that followed. ”
A spokesperson for Terraform Labs issued a statement, calling the claims unhelpful.
“Terraform Labs will not comment on pending litigation other than to say that it believes the claims are futile and that it intends to defend against them adequately.”
Aug 29, 2022