Terraform Labs Rejects Lawsuit Alleging Investor Fraud By US Law
- Terraform Labs is seeking to dismiss a class action against the company filed by US investor Nick Patterson and others.
- The lawsuit makes sense that Terraform Labs sold unregistered securities and misled investors.
- Terraform’s troubles are still ongoing, not just in the US.
Terraform Labs is attempting to have a class action against the firm dismissed on the basis that the mentioned US securities laws do not apply to its foreign-developed agreements.
Terraform Labs was accused of selling unregistered securities and misleading investors in the complaint. Dentons, the firm’s lawyers, maintained that federal securities laws did not apply since the procedures were designed and implemented outside of the United States.
The same logic, according to Terraform, applies to the RICO (Racketeer Influenced and Corrupt Organization) charges in the complaint, which say that the corporation is aiming for profits at the cost of regular investors.
This class action was launched in June 2022, alleging that the Terra tokens (UST and LUNA) were securities, among other things.
Terraform’s dismissal request, according to Law360, stated that federal securities laws and the mail and wire fraud allegations in action only applied domestically.
“The federal securities laws do not apply because the SAC does not allege that any of the protocols at issue were developed domestically, that any challenged statements by Defendants were made in the U.S., or even that Lead Plaintiff’s UST purchase was made in the U.S.”
It stated that Nick Patterson, who initiated the complaint on behalf of investors, did not effectively prove that the charges of mail and wire fraud happened domestically.
The plaintiff also failed to disclose the location of digital wallets storing his Terra tokens, which defeats any domestic harm claims.
The Terra/Luna ecosystem imploded in May 2022, wiping away billions of dollars from cryptocurrency marketplaces. Following the crash, a slew of lawsuits have been filed against the company, associated entities such as the Luna Foundation Guard, and company founder Do Kwon.
Not only in the United States but also in South Korea, prosecutors have charged Terraform Labs co-founder Daniel Shin and nine others with capital markets legislation violations, illicit trading, and breach of trust.
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