Following the Terra stablecoin depegging incident, a class action lawsuit was filed against Terraform Labs and a number of other crypto companies over the collapse of terrausd (UST). The case against Terraform Labs (TFL) was filed by plaintiff Nick Patterson on behalf of others in the same situation and the law firm Scott+Scott LLP.
Class Action Lawsuit Filed Against TFL and Affiliates – Plaintiffs Claim Terra-Based Tokens Were Unregistered Titles
According to documents recently filed with the U.S. District Court in Northern California, Terraform Labs is accused of selling unregistered securities and misleading investors. In addition to TFL, Jump Crypto, Jump Trading, Republic Capital, Definance Capital, GSR Markets, Three Arrows Capital, Nicholas Platias and Do Kwon are also named in the lawsuit. Patterson and the group of plaintiffs accuse the defendants of “repeatedly extolling the stability of the UST”.
TERRAFORM LABS AND CO-FOUNDER DO KWON SUED IN US COURT OVER STABLECOIN TERRAUSD COLLAPSE – COURT FILE
— *Walter Bloomberg (@DeItaone) June 18, 2022
Additionally, the lawsuit claims that the Terra-based tokens were unregistered securities. “Terra tokens are securities that the TFL failed to register before selling,” plaintiff’s attorneys insist. The lawsuit was revealed on June 18, 2022 and whistleblower Fatman tweeted about the case filed in California. The lawsuit explains that investors were told that UST and Anchor were stable.
Nicholas Platias, author of Anchor’s white paper, is quoted in the court filing as saying that Anchor’s interest rate was “stable” and that the decentralized finance (defi) protocol offered a “low return.” volatility” with a “reliable rate of return”. “TFL and the Luna Foundation Guard misled US investors regarding the stability of UST and LUNA, as well as the sustainability of Anchor,” the plaintiff’s argument notes.
Plaintiffs also cite a tweet posted by the official Anchor Protocol Twitter account on March 17, 2021, which said:
Anchor is not your ordinary money market. The protocol offers a stable 20% APY interest to depositors and only accepts liquid staking derivatives as collateral posted by borrowers.
Three Arrows Capital co-founder accused of telling people to take out loans against Bitcoin and deposit the proceeds in Anchor
The lawsuit against TFL and the hedge fund group follows the recent lawsuit against Binance US, which is accused of selling unregistered securities and advertising that terrausd (UST) was “safe”. Additionally, another lawsuit against Coinbase has been filed regarding the UST fallout as the plaintiffs accuse Coinbase of passing off the UST “as just another stablecoin.” The lawsuit was initiated by Erickson Kramer Osborne and the law firm Milberg Coleman Bryson Phillips Grossman LLP.
In addition to TFL, Nicholas Platias, Do Kwon, Jump Crypto, Jump Trading, Republic Capital, Definance Capital and GSR Markets, Three Arrows Capital (3AC) co-founder Su Zhu is accused of telling people to take out loans on their bitcoin. use the product on Anchor. “Seven days later, immediately after the collapse of the UST, this message was deleted,” details the lawsuit against TFL. 3AC is reportedly facing financial difficulties and members of the crypto community have accused the crypto hedge fund of being insolvent.
What do you think of the class action lawsuit against TFL? Let us know what you think about this topic in the comments section below.
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