Since the collapse of the Terra ecosystem in May 2022, which led to the crash of the algorithmic stablecoin TerraUSD (UST) and the digital token LUNA, various class action lawsuits have been filed against Do Kwon, the co-founder and CEO of Terraform Labs.
The recent lawsuit filed against Kwon was reported by a legal news platform Law360. The suit also involves two Terraform Labs executives. They are being charged with violating the Racketeer Influenced and Corrupt Organizations Act, inflating the price of UST and publicizing false information to mislead the public over the allegation of money laundering, worth $80 million, leveled against them.
The report reads in part:
“Defendants touted the stability of the coins and guaranteed 20% annual returns on coins deposited in Terraform Labs’ high-yield savings application on the Terra blockchain — the Anchor Protocol.”
According to the report, the lawsuit was filed by Matthew Albright in New York federal court, on behalf of all the victims of the TerraUSD (UST) collapse. It’s also revealed in the report that Plaintiff bought the stablecoin UST between May 1st, 2019, and June 15th, 2022. Aside from the defendants mentioned above, the suit also named some ventures as defendants.
The plaintiff alleged in the filing that some defendants initiated various money laundering activities to move assets worth millions of dollars into their respective wallets. He further alleged that UST was designed to serve as a Ponzi scheme.
“As long as demand for UST remained high, Terra’s UST/Luna exchange mechanism will keep the supply of Luna relatively low and sustain a Luna price that could support UST’s peg…
“But as soon as the demand for UST fell and users began redeeming UST for Luna in large quantities, Luna could enter a vicious cycle of hyperinflation that would collapse its own price and UST with it.”
Meanwhile, a Terraform Labs spokesperson, who reached out to TimesTabloid via an e-mail, wrote, “Terraform Labs will not comment on pending litigation other than to say it believes the claims are meritless and it intends to defend against them fully.”