Do Kwon, Luna Foundation Guard, Terra-related entities and others have all been involved in a lawsuit. A plaintiff from Illinois has alleged that investors were misled about whether Terra tokens (including UST or LUNA) are securities.
Nick Patterson filed the lawsuit in US District Court in Northern California on Friday. It alleges that several VS companies, Terraform Labs and Do Kwon, founder of VS, violate federal securities laws by selling and promoting UST and LUNA.
The plaintiff claimed that the two tokens which imploded last week resembled securities, and was promoting them with misleading information.
“On top of selling unregistered securities with the Terra Tokens, Defendants made 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 lawsuit also alleged that “a group [of] six venture capital groups that 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” failed on their promise. LFG was among them. Jump Crypto, Tribe Capital and Republic Capital were also involved.
Do Kwon was also in the lawsuit, as was his controversial behavior just before the tokens fell apart. “One of Kwon’s go-to insults is to demean and delegitimize his detractors or critics of the Terra Tokens by dismissing them as “poor.””
As previously reported, Kwon was repeatedly mocking people who had criticized the algorithmic nature of UST, with one particular event popping out against a British economist – “I don’t debate the poor on Twitter, and sorry I don’t have any change on me for her at the moment.”
The collapse of Terra tokens triggered panic on the market that caused a crash among all cryptocurrency. Within the following months, global authorities have outlined plans to regulate the crypto and stablecoin industry, and there’re already several lawsuits filed against entities somehow related to the events.
Recent reports suggest that the attack on the UST peg was inside job.