TerraForm Labs (TFL), the creator of Terra (LUNA), is being slammed with a class action lawsuit from US law firm Bragar Eagel & Squire, P.C.
In a press release, the law firm states it is filing a suit on behalf of investors against TFL and multiple associated entities, including proprietary trading firm Jump Trading, and crypto hedge fund Three Arrows Capital.
In May, Terra’s native token LUNA and its stablecoin UST both collapsed to essentially zero after UST lost its peg to the US dollar.
The complaint alleges that the defendants violated a provision of the Securities Exchange Act of 1934.
The law firm alleges that TFL:
“[carried] out a plan, scheme, and course of conduct that TFL intended to and did deceive retail investors and thereby caused them to purchase Terra Tokens at artificially inflated prices; endorsed false statements they knew or recklessly should have known were materially misleading; and made untrue statements of material fact and omitted to state material facts necessary to make the statements not misleading.”
The complaint also alleges that TFL and entities close to it violated provisions of the Securities Act by failing to register Terra’s associated tokens like LUNA, UST, ANC and others as securities.
“The complaint further alleges non-securities claims, such as California common law claims for aiding and abetting and for civil conspiracy. Finally, the complaint alleges that all Defendants violated provision of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by conducting the affairs of an enterprise through a pattern of racketeering activity. The complaint further alleges that the Defendants violated provisions of California Common Law by possessing the monetary value of Terra Tokens at inflated value which rightfully belongs to the Plaintiff and members of the class.”
Earlier this month, US and Korean authorities reportedly discussed the Terra collapse and mulled over ways to bolster cooperation between the two countries.
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