Terraform Labs and its founder, Do Kwon, are facing a significant legal challenge as a class-action lawsuit moves forward in Singapore’s High Court. The court recently rejected an attempt by Terraform’s lawyers to have the case thrown out, marking a pivotal development in the ongoing legal battle.
The lawsuit was filed in September 2022 by Julian Moreno Beltran and Douglas Gan on behalf of 375 other claimants who allege substantial financial losses due to Terraform Labs’ actions.
Dispute over arbitration process
Terraform Labs’ legal team had sought to shift the case to an arbitration process, invoking the website’s terms of use, which purportedly required users to forgo their right to a trial and the ability to join a class-action lawsuit.
However, the High Court of Singapore ruled against this argument, allowing the class-action lawsuit to proceed. This decision has significant implications for the case and sets a noteworthy precedent.
Mahesh Rai, a director of Drew & Napier, the law firm representing the claimants, commented on the case’s progression, stating, “To our knowledge, this is the furthest a class-action suit has progressed in the world.”
This assertion underscores the international significance of the lawsuit, which is now advancing toward the discovery stage, where critical evidence may be uncovered.
Allegations of fraudulent misrepresentation
The core of the lawsuit revolves around allegations of fraudulent misrepresentation by Terraform Labs, Do Kwon, and his co-founders. The claimants argue that they were misled in the promotion of Terraform Labs’ algorithmic stablecoin, terraUSD (UST).
These misleading promotions led the claimants to purchase and stake the tokens, only to see the value plummet as UST lost its peg to the U.S. dollar in May 2022, sinking to less than $0.10. The claimants collectively claim losses amounting to $57 million.
In addition to the Singaporean lawsuit, Terraform Labs is simultaneously facing legal challenges in the United States. The Securities and Exchange Commission (SEC) has brought charges of fraud against Terraform Labs, alleging the sale of unregistered securities. Terraform Labs has vigorously contested these allegations, and in October, the company requested the dismissal of the case, asserting that the SEC had failed to make its case.
As Terraform Labs and its founder, Do Kwon, grapple with legal proceedings on multiple fronts, the outcome of these cases will undoubtedly have far-reaching implications for the cryptocurrency industry.
The Singaporean class-action lawsuit, in particular, serves as an important milestone in the global legal landscape, as it progresses further than any other class-action suit to date. The lawsuit raises critical questions about accountability and transparency within the cryptocurrency space, highlighting the need for robust investor protection measures.
