Do Kwon is sued
This Friday, a California court received a class action, against Do Kwon. This complaint also affects several entities such as Terraform Labs and in particular the cryptocurrency investment funds Three Arrows Capital or Jump Crypto.
This appeal concerns the sale of unregistered securities Neighbor Securities and Exchange Commission (SEC), intended for American investors, as well as a misleading communication on the entire Earth ecosystem (LUNA):
“In addition to selling unregistered securities […]defendants have made a number of false and misleading claims regarding the ecosystem’s largest digital assets […], UST and LUNA, in order to entice investors to buy these digital assets at inflated rates. “
The inflated rates they refer to to the Anchor protocol (ANC). The qualification of an asset as a financial guarantee is in turn Howey’s test. Therefore, the arguments raised on this topic are the same that Binance.US is accused of on the FSO.
Several reasons are invoked by the group of actors to justify the choice of a Californian court. For example, there is the fact that Do Kwon studied at Stanford. Most importantly, 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 made up the ecosystem. This included, 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 puts forward several elements. The case of the deceased Basic Cash (BAC), a previous algorithmic stablecoin project developed by Do Kwon is discussed. It is estimated that from this failure, the founder of Terra he knew the risks of UST, also having an algorithmic operation. And these risks would not have been highlighted in the communication of the accused.
The argument also emphasizes Kwon’s behavior. For example, he is accused of belittling investors by questioning his business model in order to do so to hide the defects of your product. To illustrate this point, an exchange of tweets with a trader, who responds to the nickname of Algod, is highlighted.
On March 9, the merchant called LUNA in Ponzi and he ensured that if the asset broke its ATH, it would short-circuit it by great means. To which Do Kwon replied that his means were not enough:
Even after the typo I made I will frame it anyway 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 starting March 14, 2023. Whether it will be higher or lower than $ 88. If we already know the purpose of the bet, we do not know if Do Kwon has kept or will keep his word.
This 72-page complaint is therefore defended from various examples more or less convincing. The goal 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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