According to CoinDesk, Terraform Labs and its founder, Do Kwon, may face a class-action lawsuit in Singapore after the High Court dismissed an attempt to have it thrown out. Terraform lawyers tried to shift the action to an arbitration process, citing the website's terms of use. The lawyers claimed users had foregone the right to trial and to join a class-action suit, but the court ruled otherwise. Mahesh Rai, a director of Drew & Napier, which represents the claimants, said, "To our knowledge, this is the furthest a class-action suit has progressed in the world. Now we are approaching discovery stage."
The suit was filed in September 2022 by Julian Moreno Beltran and Douglas Gan on behalf of 375 others, who claim they lost a combined $57 million. The claimants are alleging fraudulent misrepresentation by Terraform Labs, Do Kwon, and his co-founders in their promotion of the algorithmic stablecoin terraUSD (UST), which led them to purchase and stake the tokens and hold on to them as UST lost its peg to the U.S. dollar in May 2022 and plunged to less than $0.10. Terraform also faces charges of fraud in the U.S. brought by the Securities and Exchange Commission, which alleges it was selling unregistered securities. In October, Terraform asked for this case to be dismissed on the grounds that the regulator had been unable to make its case. The company did not immediately respond to CoinDesk's request for further comment.