The embattled crypto chief and founder of Terra Labs, Do Kwon, has been dragged to court by investors for allegedly misleading them.
Nick Patterson filed a lawsuit in the Northern District of California on Friday, arguing that Kwon should be held responsible for the crash of the Terra ecosystem because he deliberately misled investors.
Patterson seeks class-action status to enable other victims to join the lawsuit. He maintained that Kwon flouted several federal securities laws in the process.
He explained that because of the close resemblance between tokens created by Terra and securities, they were able to market them in a way that downplayed their risks.
Terra’s crash has forced regulators to act as they have become increasingly interested in regulating the crypto industry.
Meanwhile, crypto platforms like Coinbase, Binance.US, and others that listed the asset are also facing a lawsuit from investors who alleges that the exchange failed to carry out due diligence before listing the coin.
Terra Backers Also Co-Defendants in New Lawsuit
Kwon is not the only defendant named in the suit. His company, TerraForm Labs, and former financial backers like Jump Crypto, Jump Trading LLC, Republic Capital, Republic Maximal LLC, and Tribe Capital were also added to the defense.
Others are DeFinance Capital/Definance Technologies OY, GSR Markets Limited, Three Arrows Capital, and Nickolas Platias.
Part of the lawsuit reads,
(Terra) 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.
Recall that last month, the Terra ecosystem recorded an unprecedented crash and attempts to relaunch the network have not yielded positive results as the newly launched tokens have also crashed by 90%.