- 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.
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