Step 1
Unite with Fellow Investors
Step 2
Choose the Best Attorney
Step 3
Provide Documents
Step 4
Follow Case Progress
Step 5
Get Payout
N/A.PRVT
id: 1541
Terraform Labs Stablecoin Collapse and Investor Deception Case
The defendant has requested the court to dismiss the case.
N.D. California
Court5:22-cv-03600
Case number05/20/2021
Class period Start05/25/2022
Class period End- Investors filed a lawsuit against Terraform Labs for falsely promoting UST as a reliable algorithmic stablecoin and hiding the role of outside intervention in maintaining its peg.
- After UST collapsed in May 2022, the Terra ecosystem lost over $40 billion, and investors were left with worthless tokens.
Case Details:
Terraform Labs, led by Do Kwon, created the UST algorithmic stablecoin and its sister token LUNA, claiming UST would always hold its $1 value through decentralized mechanisms. The project attracted billions from investors who believed it was a stable, self-correcting system.
But in May 2021, UST lost its dollar peg. Rather than disclose the flaw, Terraform secretly arranged for Jump Trading to buy up UST and restore the price. Afterwards, the company publicly claimed the algorithm had worked as designed, misleading investors into believing the system was stable.
Terraform used this false narrative to promote UST and LUNA throughout 2021 and early 2022. Meanwhile, insiders and close partners were rewarded with discounted tokens and profited heavily. Terraform did not warn investors that UST’s survival had depended on a one-time bailout, not the technology itself.
In May 2022, UST de-pegged again—this time without intervention. The token collapsed to nearly zero, wiping out over $40 billion in market value across UST, LUNA, and associated DeFi platforms. Investigations later revealed that Terraform Labs had known about UST’s vulnerabilities for over a year but continued to mislead the public.
Based on these events, investors filed a lawsuit against Terraform Labs, claiming the company:
- It falsely marketed UST as a fully decentralized and self-sustaining stablecoin.
- It failed to disclose its reliance on private bailouts to maintain the token’s peg.
- It allowed insiders to profit while retail investors were misled and left with massive losses.
Investors believe Terraform Labs deliberately concealed critical risks and promoted a false sense of security around UST.
Case Status
Motion to dismiss
Alleged Offence
Misleading Statements,
Financial Misrepresentation,
Failure to Disclose,
Omissions
Suspected Party
Directors,
Management
Security Type
Crypto Asset
Trade Direction
Long
Shock Event Date
05/23/2021
Filing date
06/17/2022
Judge
Beth Labson Freeman