Do Kwon is sued
This Friday, a California court received a class action lawsuit, targeting Do Kwon. This complaint also concerns several entities such as Terraform Labs and cryptocurrency investment funds Three Arrows Capital or Jump Crypto in particular.
This appeal deals with the sale of unregistered securities near Securities and Exchange Commission (SEC), intended for American investors, as well as a misleading communication on the entire Terra (LUNA) ecosystem:
“In addition to selling unregistered securities […]the defendants made a series of false and misleading statements regarding the largest digital assets in the ecosystem […], UST and LUNA, in order to entice investors to buy these digital assets at inflated rates. »
The inflated rates referred to refer to the Anchor protocol (ANC). The qualification of an asset as a financial security is in turn Howey’s test. Thus, the arguments raised on this subject are the same as what Binance.US is accused of on the UST.
Several reasons are invoked by the group of plaintiffs to justify the choice of a Californian court. For example, there is the fact that Do Kwon studied at Stanford. But above all, that Terraform Labs has received funding from many California-based investment fundssuch as Coinbase Ventures, Pantera Capital or Blockchain.com Ventures.
The same reasoning is developed for Anchor, the main protocol that constituted the ecosystem. This counted, among others, Alameda Reaserch among its investors. These elements justify, according to the complainants, the Californian roots of Terraform Labs.
👉 To go further – Find our guide to buying your first cryptocurrencies
Regarding the misleading communication of which the various parties are accused, the collective advances several elements. The case of the deceased Basis Cash (BAC), a previous algorithmic stablecoin project developed by Do Kwon is discussed. It is estimated that by this failure, the founder of Terra knew the risks of UST, also having an algorithmic operation. And these risks would not have been underlined in the communication of the defendants.
The argument also emphasizes Do Kwon’s behavior. For example, it is accused of belittling investors questioning its economic model, in order to to conceal the faults of its product. An exchange of tweets with a trader, responding to the nickname of Algod, is highlighted to illustrate this point.
On March 9, the trader called the LUNA a Ponzi and assured that if the asset broke its ATH, it would short it with big means. To which Do Kwon had replied that his means were not sufficient:
Even after the typo i made i will still frame this pic.twitter.com/EB9jU6W3Oq
— Algod🫐 (@AlgodTrading) May 10, 2022
There is also an interesting fact to highlight about the relationship between the two people. During the week following this exchange, they bet a million dollars on the LUNA prize as of March 14, 2023. Whether it will be above or below $88. If we already know the finality of the bet, we do not know if Do Kwon kept or will keep his word.
This 72-page complaint is thus defended by various examples more or less convincing. The objective here is to induce justice to act against Do Kwon and the various defendants.
As with Binance.US, it is not certain that this procedure will lead to sanctions. On the other hand, it is certain that it is only one of the episodes, of a larger court case.
👉 Also in the news – Three Arrows Capital (3AC) suffers margin calls and liquidations from its creditors
Sources: Class Action, Bet on LUNA, Image: LinkedIn
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