Class-Action Suit Accuses TerraForm Labs of Deceiving Investors

Complaint alleges that company’s leaders misled people into buying Terra tokens at “artificially inflated prices”

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • Suit claims that Terra leaders Do Kwon, Nicholas Platias and others conducted business “through a pattern of racketeering activity”
  • TerraForm Labs failed to register TerraUSD (UST), Terra (LUNA) and other tokens, the complaint says

Law firm Bragar Eagel & Squire has launched a class-action lawsuit against TerraForm Labs, the company that conceived the Terra blockchain, and others, following the crash of various Terra tokens in May.

The firm filed the suit against TerraForm Labs in the United States District Court for the Northern District of California on behalf of those who purchased Terra tokens between May 20, 2021, and May 25, 2022, according to a press release published late Sunday night. 

Other defendants include TerraForm Labs co-founder Do Kwon, former TerraForm Labs Head of Research Nicholas Platias, Jump Crypto, GSR and Three Arrows Capital. Investors have until Aug. 19 to apply to be the case’s lead plaintiff.

The suit comes after the crash of algorithmic stablecoin TerraUSD (UST) and Terra (LUNA) in May. The prices of UST and LUNA dropped by 91% and 99.7%, respectively, between May 7 and May 12 and never recovered. The Terra blockchain subsequently relaunched without UST, leaving behind a renamed Luna Classic (LUNC) and UST currently trades at less than 3 cents on the dollar.

The complaint alleges that the defendants deceived retail investors through lies, fact omissions and endorsing misleading statements, causing them to purchase Terra tokens at “artificially inflated prices.” 

It also states that they violated the Securities Act by participating in TerraForm Labs’ failure to register the Terra tokens.

Finally, the law firm accuses the defendants of violating the Racketeer Influenced and Corrupt Organizations Act (RICO) “by conducting the affairs of an enterprise through a pattern of racketeering activity.”

TerraForm Labs did not immediately return a request for comment.

The suit follows the seizure of transaction records and other documents from South Korean crypto exchanges last week by Investigators from Seoul Southern District Prosecutors Office. Prosecutors reportedly are investigating whether the Terra digital tokens’ crash was an intentional move by Kwon.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

The Department of Justice and Commodity Futures Trading Commission announced back-to-back lawsuits against KuCoin Tuesday

article-image

Judge Failla found that Coinbase didn’t operate as an unregistered broker in offering its wallet service

article-image

A fund by Laser Digital offers investors exposure to the Polygon network, while a new 21Shares ETP focuses on staking rewards from Toncoin

article-image

Sponsored

The TRON network’s integration into Dune brings a wealth of data and insights to the fingertips of users

article-image

A BTC futures fund offered by Hashdex and Tidal Investments has gotten regulatory clearance to hold bitcoin directly

article-image

At launch, Chain Signatures will be compatible with Bitcoin, Ethereum and Cosmos network chains, as well as DogeCoin and XRP Ledger