TerraForm Labs, the company that conceived the Terra blockchain, is on the receiving end of yet another class-action lawsuit. Law firm Bragar Eagel & Squire have filed a new lawsuit against TerraForm Labs in the United States District Court for the Northern District of California on behalf of those who purchased Terra tokens between May 20, 2021, and May 25, 2022. Other defendants include TerraForm. Labs co-founder Do Kwon, former TerraForm Labs Head of Research Nicholas Platias, Jump Crypto, GSR and Three Arrows Capital.
The class-action suit claims that Terraform Labs along with other entities are responsible for leading retail investors into purchasing Terra ecosystem tokens at “inflated prices,” making or endorsing false or misleading statements, aiding and abetting, civil conspiracy, failing to register securities, and racketeering.
The filing calls for anyone who purchased Terra ecosystem tokens, including but not limited to the Terra blockchain’s native assets, LUNA and UST, between May 20, 2021 and May 25, 2022 to participate in the action.
The complaint alleges that the defendants deceived retail investors through lies, fact omissions and endorsing misleading statements, causing them to purchase Terra tokens at “artificially inflated prices.”
It also states that they violated the Securities Act by participating in TerraForm Labs’ failure to register the Terra tokens.
Finally, the law firm accuses the defendants of violating the Racketeer Influenced and Corrupt Organizations Act (RICO) “by conducting the affairs of an enterprise through a pattern of racketeering activity.”
Terra suffered a dramatic collapse in May when its algorithmic stablecoin, UST, lost its peg to the US dollar, triggering a death spiral that wiped out around $40 billion (roughly Rs. 3,20,060 crore) from the crypto market in a matter of days . Several major crypto players, including Terra backers Three Arrows Capital, were hit hard as LUNA crashed to zero and the market plummeted, resulting in a domino effect that spilled across the industry.