Do Kwon, TerraForm Labs, Three Arrows Capital, and Others Sued for Misleading LUNA, UST Investors

Summary:

  • Do Kwon, TerraForm Labs, and initial financial backers of LUNA and UST have been sued in a Californian court for carrying out an unregistered securities offering and misleading investors.
  • The additional defendants in the lawsuit include Terra’s backers of Jump Crypto, Jump Trading LLC, Republic Capital, Republic Maximal LLC, Tribe Capital, DeFinance Capital/Definance Technologies OY, GSR Markets Limited, Three Arrows Capital, and Nickolas Platias.
  • The plaintiff, Nick Patterson, is suing on behalf of all others in a class-action lawsuit.

Do Kwon, TerraForm Labs, and several of the project’s backers, are being sued in the United States District Court, Northern District of California, in a class action suit ‘for violations of the Federal Securities Laws’ and misleading investors.

Defendants Violated Federal Securities Laws and Misled LUNA and UST Investors.

The lawsuit, spearheaded by Illinois resident, Nick Patterson, as the plaintiff, claims that Do Kwon, Nicholas Platais, TerraForm Labs Ptd Ltd., Jump Crypto, Jump Trading LLC, Republic Capital, Republic Maximal LLC, Tribe Capital, DeFinance Capital/Definance Technologies Oy, GSR Markets Limited, and Three Arrows Capital Ptd Ltd. (collectively, the “Luna Foundation Guard”), violated existing laws regarding the issuance of securities and misled LUNA and UST investors. 

Defendants Made False Statements Regarding UST and LUNA.

In addition, Nick Patterson is suing the above-mentioned entities on behalf of persons and entities who purchased Terra Tokens between May 20th, 2021, and May 25th, 2022 and who were damaged as a result of both LUNA’s and UST’s volatility in the crypto markets.

Mr. Patterson claims that the defendants sold unregistered securities and continued to make a ‘series of false and misleading statements regarding the largest Terra ecosystem digital assets by market cap, UST and LUNA, in order to induce investors into purchasing these digital assets at inflated rates.’

The LUNA Foundation Guard Promised to Defend UST’s Peg.

Furthermore, the lawsuit claims TerraForm Labs made additional statements that UST was stable since it was paired with LUNA and had a sustainable ecosystem through the Anchor Protocol.

The LUNA Foundation Guard, comprising of the defendants, promoted the project and ‘promised to support and fund the Terra ecosystem and to defend the peg in the event that high volatility caused the UST/LUNA pair to become untethered from one another.’ The lawsuit adds:

These promotions, along with the announcement of financial backing of major venture capitalists in the sector, were a siren song to both veteran and rookie crypto investors alike, luring them in with a purportedly “stable” digital asset in UST that would nevertheless provide outsized returns on investment via Anchor.

The marketing of UST and Anchor was so effective that approximately $14 billion of UST’s market cap (75%) was deposited into Anchor at its peak.

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