A lawsuit has been filed against Terraform Labs and its chief executive officer because it failed to register with the US Securities regulatory body and other misleading information regarding its coins.
The whole crypto industry knows about Terra’ Luna and its stable coin UST, which collapsed last month. However Terraform Labs, the developer team behind Terra blockchain, launched a new Luna coin without any stable coin but still failed to collect that trust level in the industry, which was earlier. At the beginning of last month, Terra’s coins were standing in the top 10 ranked crypto assets but now Terra’s new Luna coin is standing below 200 ranked assets.
TheBlock reported that a lawsuit was filed in the US District Court, Northern District of California, by Scott + Scott Attorneys at Law, against the Terra founder Do Kwon and his developer company Terraform Labs. As per the lawsuit, the project team incorrectly represented Terra’ UST coin for its stability, to achieve a better trust level among the crypto investors.
Through the Lawsuit, Plaintiff claimed that Terra tokens bear all the hallmarks of being investment contracts but it falls under the securities law and it was a reason for the Terraform labs to register with the US Securities and Exchange Commission (SEC) agency.
So the lawsuit noted that the failure of the Terra project with the SEC agency was a type of violation of securities law and Do Kwon should be punished for the same.
The lawsuit also claimed that the team of the Luna Foundation Guard, the nonprofit organization behind the Luna project formed when the Terra’s native tokens were under the critical situation against severe market volatility, worked on behalf of TFL to promote the potential stability of TerraUST and also incorrectly claimed to the investors that reserve pool would be sufficient to defend against a “proverbial run on the bank by UST/LUNA investors.”
The lawsuit noted that the whole business model and backend operations of Terra was not good, which was proved during the high market volatility between May 6 and May 9, where the Luna token faced a downfall by 99% and the UST stable coin saw a correction by 91%.