Terra team held in South Korea as Do Kwon named in securities lawsuit

A slew of crypto companies including Terraform Labs, Three Arrows Capital, and Jump Crypto, along with Terra chief Do Kwon are the targets of a recently filed class-action lawsuit that alleges they misled investors, lied about their tokens’ stability, and broke federal securities laws.

The suit, filed in California by Illinois-based investor Nick Patterson, alleges the defendants, which also include DeFinance Capital, Republic Capital, and Terra’s head of research Nicholas Platias, conned investors by failing to register Terra’s LUNA and UST tokens as securities with the SEC. The suit also claims:

• The defendants made a series of misleading and grandiose statements regarding UST and LUNA to lure investors into purchasing at inflated rates.
• Terraform Labs gave a false impression of UST and LUNA’s stability — these claims are backed up by charts which show the tokens plunging 91% and 99.7% respectively last month.
• A number of the defendants, including Jump, Tribe Capital, DeFinance, and Three Arrows worked with TFL as part of its so-called Luna Foundation Guard (LFG) to mislead investors into believing that its reserves were sufficient to “defend the peg” and maintain interest payments.

The Luna Foundation Guard is made up of six venture capital firms and was intended to build up and provide reserves to get the Terra ecosystem through particularly tough times and prevent a de-pegging.

But despite this, LUNA and UST spiraled last month, wiping billions from crypto markets.

Read more: Crypto investors sue Binance US over marketing Terra’s UST as ‘safe’

Mr. Patterson is seeking a jury trial and has called for the award of “all actual, general, special, incidental, statutory, rescission, punitive, and consequential damages” to which he and his fellow investors are entitled.

Now Terra employees are in the spotlight

The problems keep coming for Do Kwon and Terra.

Besides this most recent lawsuit, the company has reportedly been fined nearly $80 million in South Korea for tax evasion, and now local authorities have barred all current and former Terra employees from leaving the country.

According to South Korean outlet JTBC News, Terra workers may be restricted from traveling abroad as authorities gear up for further investigations into the ecosystem’s collapse.

Some of those affected didn’t even know they’d had their travel rights restricted until they attempted to leave the country.

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