Victims of the UST-induced market crisis that saw over $40 billion in crypto assets evaporate in May have filed a fresh lawsuit in Singapore against embattled Terra Form laboratories CEO Do Kwon, the Luna Foundation Guard (LFG), and Terra founding partner Nicholas Plates.
What Went Wrong with TerraUSD?
Do Kwon’s promises were readily swept away by waves on May 9, 2022, when the TerraUSD (UST), valued at $18 billion at the time, collapsed.
The cryptocurrency failed to hold its $1 peg, falling to $0.35. LUNA, a token designed to keep the UST price from plummeting precipitously, saw its value plummet from $80 to a few cents.
The TerraUSD collapse occurred in three stages, beginning with two dealers violating the currency’s peg. Terraform Labs and three allies attempted to “fix” the situation by acquiring $2 billion in UST. As a result, the funds were depleted due to an uncontrolled sell-off.
The development did not end there, as it hyperinflated LUNA and eventually destroyed the prices of the two assets, forcing the crypto market to lose almost $40 billion.
Do Kwon’s Legal Headache
According to documents filed in Singapore’s high court on September 23, 359 people claimed that Kwon and his co-defendants made false representations about Terra’s algorithmic stablecoin TerraUSD’s reliability (UST). The plaintiffs expressly claimed that Do Kwon was aware of “the structural fragility of algorithmic stablecoins” as a result of his engagement with Basis Cash (BAC), another stablecoin that failed under his supervision in early 2021, before the launch of UST.
The claimants further claimed that the defendants “knew or should have known that the claimants wanted to buy and hold digital stablecoins that were not susceptible to the volatility of the broader market and yield a respectable passive return.” The claimants sustained significant losses on their UST holdings as well as additional damages as a result of the trio’s acts. The claims asked the court to give them approximately $57 million for their losses and to force the trio to pay “aggravated damages.”
The case comes amid an intensifying search for Kwon, who has now become an international fugitive after South Korea issued an arrest warrant. Therefore, the Terra blockchain ecosystem collapsed in May, Kwon has been the victim of many legal actions and threats. In September, South Korean authorities issued an arrest order for the Terra co-founder, which was later rejected, and Interpol added Kwon to its Red Notice list, urging that law enforcement identify and possibly jail him. On October 6, the South Korean Ministry of Foreign Affairs issued a notification ordering Kwon to return his passport within 14 days, or it would be invalidated.
Since his Terra empire collapsed in May, leaving millions of investors with severe losses, the Korean-born developer has been the target of several litigation lawsuits in the United States and South Korea over the last four months.
Eventually, local media reported that prosecutors were “in the process of freezing” tokens “believed to be owned by Kwon.” These coins were allegedly stored on an unknown “overseas” cryptocurrency exchange that was “cooperating” with the Seoul Southern District Prosecutors’ Office.
Despite not identifying his location, Kwon has been active on social media amid the issue and stated in September that he was “making zero attempt to conceal.” In reaction to the complaint, one Redditor said Kwon was “doing a bad job at acting innocent for a guy who is innocent.” Others speculated that he had undergone plastic surgery to conceal his features.
While it is unclear where Kwon is, Korean authorities reportedly claimed that he left Singapore for Dubai last month. However, no documents were found indicating that Kwon had entered the city, prompting Korea to ask neighbouring countries to assist in tracking his location. Kwon denied being on the run in a recent interview but refused to identify his location.