Back in mid May, Terra’s community witnessed the collapse of Luna. Following that, Luna revives and passes the proposal of the new tax burn mechanism. This week, a hearing about a class-action lawsuit brought against Terraform Labs CEO Do Kwon will take place in Singapore’s Supreme Court. The lawsuit was filed on behalf of more than 350 international investors. The investors claimed that they have lost around $57 million from the downfall of Terra’s ecosystem and the failed algorithmic stablecoin TerraUSD (UST), based on a Wall Street Journal report.
During the collapse of the Terra ecosystem, there were over $40 billion of investors’ funds wiped out in a short time of a couple weeks. Along with that, many other cryptocurrencies like Bitcoin suffered from large selloffs and accompanied with large price plunges. Not only individual investors were impacted, but also the big institutions. It is worth mentioning that the Luna crash caused the bankruptcies of some high-profile crypto lenders, including Three Arrows Capital, Voyager and Celsius. More or less, this collapse got regulators’ attention across the world in regards to regulations of crypto investments.
Back to the lawsuit, the legal claim states that the investors expected the UST stablecoin could perform its job of store of value, with being pegged 1:1 to the US Dollar. It was supposed to help investors to hedge against the price volatility of crypto markets. However, although Kwon was aware that there is structural weakness of the UST stablecoin, he still made false and misleading statements that induced investors to purchase the asset.
The hearing of this class-action lawsuit will start on November 2. The lawsuit is led by Julian Moreno Beltran, from Spain who said that he has lost about $1.1 million worth of UST, and a Singapore native Gan Yi Dong. The rest of the claimants believe that they have the right to fight for compensation for the purchase of UST tokens.
Closing Thoughts
While I am feeling empathy for the victims of Terra’s collapse, I would like to suggest everyone to do your own research before investing in any assets. At the same time, don’t forget to stay tuned in the crypto market through reading our daily industry news, in case anything bad happens again and we can stop loss in a timely manner to eliminate bigger losses.
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