Terra co-founder Do Kwon faces $79.8m lawsuit in Singapore after crypto crash
Terraform Labs co-founder Do Kwon is facing a US$56.9 million (2.11 billion baht) representative action suit in Singapore over his alleged role in a wipeout of cryptocurrencies he created.
Julian Moreno Beltran, a Spanish citizen, and Douglas Gan, a Singaporean, filed the lawsuit in the Singapore High Court in September against the South Korean, whose full name is Kwon Do-hyeong, and three other defendants on the basis of alleged fraudulent misrepresentation.
Beltran and Gan represent 359 plaintiffs who claim they had been misled into thinking the cryptocurrency TerraUSD, also known as UST, was designed to have a relatively stable price, and they suffered heavy losses after TerraUSD crashed.
The other defendants are listed as Terraform Labs, which Kwon co-founded, Greek co-founder Nikolaos Alexandros Platias, and Luna Foundation Guard (LFG). Terraform Labs and LFG are registered in Singapore.
Kwon was previously based in Singapore but is no longer in the republic. He is believed to be in Europe, according to the Korean Broadcasting System. An Interpol Red Notice was issued against him in September, requesting law enforcement agencies worldwide to locate and arrest him.
The Terra-USD stablecoin was meant to have a constant US$1 value in a complicated arrangement with sister token Luna.
Terraform Labs also ran Anchor Protocol, a lending and borrowing platform where users could earn returns of almost 20 per cent annually by lending out their UST holdings.
However, in May, due to a loss of business confidence, many investors began withdrawing their funds in Anchor, causing the value of UST to crash to a low of 20 cents, resulting in the wipeout of its market value amounting to billions of US dollars.
The $56.9-million sum which the claimants are seeking is the difference in value between the sum in US dollars they believed their assets were worth and the value of their assets after the crash.
Most of the claims are in the range of hundreds of thousands of UST. The plaintiffs are also seeking aggravated damages for fraudulent misrepresentation.
They allege Kwon and Platias, who was head of research at Terraforms Labs, had claimed that UST was stable by design, and it would be able to maintain its peg regardless of market size, volatility or demand.
They cited a white paper by the pair, which was published a year before the launch of UST in 2020, in which they claimed the cryptocurrency they were proposing would maintain a stable price due to their algorithm.
Liesel Chong, a senior lawyer at Gloria James-Civetta & Co, said there is a high threshold to prove fraudulent misrepresentation.
“The person who made the representation must have done so knowing that it is false, or without belief in its truth, or recklessly as to its truth,” she said.
Kwon’s lawyer Melissa Thng from Dentons Rodyk said: “For the time being, our clients’ position is that none of the claimants were ‘cheated’, and they intend to defend the case vigorously at the appropriate time.”
The next case conference, during which the court is expected to set timelines and give further directions, is expected to take place on November 16.
The Straits Times
Asia News Network
